Greece is headed for another election, Eurozone exit is now the central case of consensus

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.

For more news and analysis, visit Also sprach Analyst. Follow us on Twitter and Facebook.

Get our daily email update FOR FREE!

About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.