Forget the monotonous term “Grexit” that has occupied thousands of newspaper pages throughout the years of the crisis, Citigroup Inc. economist Ebrahim Rahbari adds yet another word to the recession’s lexicon.
It was him that in 2012 coined the term “Grexit” to describe the danger of Greece leaving the European single currency. At the time, the probability of such a development was placed at 50% by Citigroup and within the next 18 months, in 2014, it was raised reaching a staggering 90%. Three years after the term’s introduction to the everyday life of Greeks, the country is still in the Eurozone. Yet speculation on a Grexit is still here as Athens struggles to come to a solution with its creditors, who demand economic reforms to be put in place in order to provide fresh cash to Athens.
The Euro has proven to have endured more than he predicted a few years back, and the Citigroup economist has come up with a new shorthand. While a possible Grexit is not inconceivable, Citigroup describes the imminent outlook as what they call “Grimbo”: “For those grey scenarios where Greece is not going to get money from the Europeans and there is no resolution for a durable horizon,” Rhabari told Bloomberg Television on Wednesday.
As he explains there are two such scenarios: The first, wants a new aid deal to be wrapped up but only after the imposition of capital controls and a possible default. “The shock could provide an extra push on both sides to conclude the negotiations,” Citigroup economists explained according to Bloomberg.
The second scenario “Grimbo” could also occur if there is no fresh aid, the government defaults, capital controls are introduced and IOUs are issued yet Greece still hangs on to the euro.
“Over time, the stressed liquidity situation, and notably deposit-withdrawal restrictions for banks, would significantly increase pressure on the Greek government, making fresh elections likely,” Citigroup said. “Those could produce a mandate for a new bailout agreement with the euro zone or pave the way for an eventual Grexit, but this could still leave Greece in limbo for an extended period of time.