Citi sees 90 percent chance of Greece leaving the euro

MILAN Thu Jul 26, 2012 2:39am EDT

A Citibank sign on a bank branch in midtown Manhattan, New York, November 17, 2010. REUTERS/Mike Segar

A Citibank sign on a bank branch in midtown Manhattan, New York, November 17, 2010.

Credit: Reuters/Mike Segar

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MILAN (Reuters) - The chances of Greece leaving the euro in the next 12-18 months have risen to about 90 percent, U.S. bank Citi said in a report on Thursday, saying Athens was most likely to quit the single currency within the next two to three quarters.

The report, dated July 25 but distributed in an email on Thursday, said the bank expected Italy and Spain to take a formal bailout from the European Union and IMF on top of the banking aid for which Madrid has already asked.

Citi economists had previously put the chances of a Greek exit at 50 to 75 percent.

"We remain gloomy on the euro crisis," Citi economists said.

"Over the next few years, the euro area end-game is likely to be a mix of EMU exit (Greece), a significant amount of sovereign debt and bank debt restructuring (Portugal, Ireland and, eventually, perhaps Italy, Spain and Cyprus) with only limited fiscal burden-sharing."

Citi said it expected Greece's exit from the euro coupled with economic weakness in the euro zone's periphery to trigger further sovereign downgrades in the single-currency bloc in the next two to three quarters.

It saw at least a one-notch downgrade by at least one major agency for Austria, Belgium, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain.

Outside the euro area, Citi expects both the U.S. and Japan to have their ratings cut by one-notch over the next two to three years. Also Britain may lose its triple-A rating over the same period due to economic weakness and fiscal slippage.

(Reporting by Valentina Za; editing by Patrick Graham)

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Comments (6)
Willvp wrote:
if W-European banks got their money out of Greece, the emu will drop greece.

if not all money is out there will be another “bail-out” that can be grabbed by the banks.

once that excercise is done, goodbye Greece.

Pity: debatable
Fact: not debatable

The EU will stay in existence, that will be taken care of by the thousand of politicians of 17 countries who are getting paid handsomely every month. They will do all, even push europe in a hard recession, to achieve keeping their pay at the cost of the population who will suffer big time.

Jul 26, 2012 3:16am EDT  --  Report as abuse
LTR wrote:
So if we all get cut down a couple of notches, then do the rating agencies start grading on a curve? Perhaps a A- becomes the new AAA ?

Aside, it seems QE3 is inevitable in order to bring the Euro back to 1.35 dollars. I see gold moving up rapidly.

Maybe we can keep printing our way out of this.

Jul 26, 2012 5:16am EDT  --  Report as abuse
pacesmill wrote:
The forecast of the of the Citi economists that there is “90 percent chance of Greece leaving the Euro,” in the next two to three quarters makes the Delphi oracles look pale by comparison. Banking economists like their financial counterparts in Wall Street have become the promoters of international financial speculation. When you ask a US banker about their corporate social responsibilty, they take cover under their “fiduciary responsibilities” to the stockholders not their customers. The international business community looks up to the US financial community with suspicion and fear. Wall Street investment houses and hedge funds play havoc in the international money markets for their own benefit (the likes of the caustic mortgage investment packages).

The behavior of Goldman Sachs offering “help” to Greece by lending the Greek Government loans at exorbitant rates under unethical schemes for high management fees (over $300 million) is an example. Morever, they used the interest and fees collected from Greek Government to beat down the price of the Greek government bonds in violation of their contractual obligations to “help” the Greek goverment in its stabilization program.

My advice to the Citi economists is to clean up their forecasts and worry about the financial health of Citi and the drop of its stock by nearly 90 per cent.

C. G. Alexandrides, Ph.D.
Atlanta, Ga.

Jul 26, 2012 1:20pm EDT  --  Report as abuse
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