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As it so happens, none of the major investment banks really view this weekend’s election results out of Greece as having much impact on whether the country will exit the eurozone or not.Citi leaves their odds of a Greek exit between 50 and 75 per cent over the next 12-18 months. Jurgen Michels wrote earlier today:
While the outcome of the election, and the likely agreement on an ND-led government has reduced the risk of an exit in the very near term, with the large role of SYRIZA in Parliament and its power to organise protest against further austerity measures and far-reaching structural reforms on the streets, it looks to us unlikely that Greece will be able to fulfil only slightly amended conditions of the MoU.
Morgan Stanley still has the chances that Greece leaves the euro at 35 per cent over the next 12-18 months, but that could change. Cross-asset strategist Greg Peters writes in a note today:
To the extent that a government willing to cooperate with Europe emerges, the probability of a near-term eurozone exit, which we put at 35% over 12-18 months, will diminish — regardless of whether this government can comply with the conditions. This is because Europe could at least say that Greece is back on track, perhaps with a slightly different programme given a a deeper recesision than expected; and the Greek politicians can present a somewhat milder adjustment path to the Greek people.
Credit Suisse still has the chances of a Grexit this year pegged at 20 per cent, and that includes a 10 per cent chance that the entire eurozone breaks up. Credit Suisse analysts published a note this morning saying the following:
Given the economic costs of a break-up for Greece (10% decline in GDP, 40% inflation) and for Europe (direct costs of around 105% of Greek GDP and indirectly at least a 2% points hit to Euro area GDP), we continue to think that the probability of a Greek exit is low.
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