Greece is headed for another election, Eurozone exit is now the central case of consensus15 May, 2012, 21:12. Posted by Zarathustra
Tags: Euro Crisis
After Greece failed to form a coalition government after the latest election, Greece is headed for yet another election. The immediate result is a steep dive of EURUSD.
With yet another election imminent in Greece after the failure to form a new government, the political chaos in Greece has substantially increased the probability of a Greek eurozone, or as Willem Buiter of Citi called it, a “Grexit”. Citi, as we mentioned, now sees the probability of a Greek eurozone exit at 50-75%, and there is noticeable change of tone even among EU officials.
Nomura’s foreign exchange strategy said that basically Greece eurozone exit is no longer being viewed by the consensus as a small probability event. In fact, Grexit has become the consensus in the market.
Following the surprising election results in Greece a week ago, consensus opinion has shifted substantially with regard to the central case for Greece. The consensus now believes that a Greek exit from the eurozone is likely over the next 6-12 months:
• We conducted an informal poll at the Euromoney FX conference in London last week, and a large majority of the audience (around 70%) judged that Greece was likely to exit the eurozone over the next 12 months.
• Bloomberg announced a more comprehensive poll of investors at the end of last week, in which 57% of respondents thought that a Greek exit from the eurozone was likely in 2012.