S&P rates Greek euro zone exit odds at one-in-three
Credit ratings agency Standard&Poor’s has described the odds that Greece will exit the euro zone following the June 17 parliamentary elections as “at least a one-in-three chance”.
“This could be brought about by Greece rejecting the reforms demanded by the troika – the European Commission, International Monetary Fund (IMF), and European Central Bank (ECB) – and a consequent suspension of external financial support,” the agency said in a statement.
“Such an outcome would, in our view, seriously damage Greece’s economy and fiscal position in the medium term and most likely lead to another Greek sovereign default.”
Snap elections in May produced no clear winner, with left-wing coalition Syriza, which opposes the terms of the bailout agreed with the EU, IMF and ECB, finishing second. The two mainstream parties that support the austerity measures imposed by the troika, conservative New Democracy and socialist Pasok, did not win enough seats to form a majority.
S&P said that it was unlikely that other troubled euro zone members would follow Greece out of the exit door, both because of their own reluctance to accept the resulting economic hardship, but also because of renewed support from the EU.
“European policymakers would be keen to demonstrate that Greece is a special case. We would expect growing financial support and leniency in the face of slipping targets for other sovereigns embroiled in the debt crisis,” the agency said.
“We currently do not consider that a Greek withdrawal would automatically have any permanently negative consequences for other peripheral sovereigns’ prospects of continuing euro zone membership. For the same reasons, it is our base-case assumption that a Greek exit by itself would not automatically trigger further downward sovereign rating actions elsewhere,” S&P said.