Calamos Supports Greece
GreekReporter.comGreek NewsEconomyCitigroup Inc: Citigroup Sees Greek Exit On January 1, 2013

Citigroup Inc: Citigroup Sees Greek Exit On January 1, 2013

Greece will leave the euro zone on January 1, 2013 and its new currency will immediately fall by 60% against the euro, unleashing a sizable and unavoidable wave of contagion across Europe,” according to a report published by Citigroup yesterday.
Citigroup, includes three main changes in this month’s forecasts. First, Q1 data for Japan and the euro area were stronger than expected. Second, China’s economy is now slowing markedly and greater policy easing is likely. Third, they believe that the probability that Greece will leave EMU in the next year or two is 50-75%, and attempt to include “Grexit” in the bank’s forecasts.
According to the report, “there are many uncertainties, but in our new forecasts we assume that Greece will leave EMU in early 2013, followed by sharp currency devaluation, with a large drop in economic activity in 2013 and a modest rebound further ahead.”
And they add that sizable adverse economic and financial contagion to other euro area countries will be unavoidable and this is already happening to an extent. “We expect that ‘Grexit’ will be followed by far-reaching policy responses. We forecast the ECB will cut rates to 0.5% and resume its multi-year LTRO program, a second package for both Portugal and Ireland, some kind of Troika program for Spain, plus financial market support for Spain’s and Italy’s government bonds,” explains Citigroup.
Citigroup doesn’t expect an early move to Eurobonds or full fiscal burden sharing. But, if deposit flight from periphery banks escalates, then EU policymakers may agree to a jointly-funded enhanced deposit guarantee scheme (DGS) — which aims to protect deposits against EMU exit and currency denomination as well as bank insolvency — plus a jointly-funded bank recapitalization scheme.
“Grexit, if it happens, will not end the EMU crisis,” Citigroup expects.
(source: Dow Jones, capital)

See all the latest news from Greece and the world at Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!

Related Posts