Citigroup: Greece probably to leave eurozone next year

Posted by in Economy

Three eurozone nations will have to restructure their government debt next year, and Greece will probably exit the eurozone, Citigroup predicts. Italy, Spain and Greece will need debt restructures next year, Michael Saunders, Citigroup’s chief European economist believes.

The same forecast is true of Ireland, Portugal, Cyprus and Slovenia by 2017. The group said in a closed report obtained by some media outlets that it expects Greece’s exit from the eurozone and a series of sovereign debt restructures. The moves will be accompanied by steps towards tighter integration among European Monetary Union countries.

Grim Predictions from … outer space

In its 28-page report “European Economic Forecast Highlights” the Citigroup forecasts recession of even 11.8% in 2014, unemployment of even 40% in 2015 and debt of 453.2% of GDP in 2014!

Recession: 7.2% in 2012, 7.4% in 2013, 11.8% in 2014, 3.7% in 2015. Return to growth in 2016 (1.6%) and 2.8% in 2017.

Unemployment:
24.6% in 2012, 29.7% in 2013, 35.9% in 2014,  40.3% in 2015 and το 2016 and 39.3% in 2017.

Debt to GDP: 
 178% in 2012, 192.8% in 2013, στο 453.2% in 2014, στο 451.8% in 2015, στο 417.4% in 2016 and 145.4% in 2017.

The Citigroup keeps at  60% the options that Greece would exit the eurozone within the period of next 12 to 18 months.

Greek Debt Sustainability

At the same time, rating agency Moody’s expressed doubt on the sustainability of the Greek debt despite the Eurogroup deal on Monday.

“Greece΄s debt remains unsustainable despite short-term relief from this week΄s deal with major creditors, and Athens will probably need some of the principal on its debts reduced eventually, Moody΄s Investors Service said Thursday.

Tuesday΄s deal with euro-zone finance ministers and the International Monetary Fund, unlocking the next 44 billion euros ($57 billion) in loan payments from Greece΄s bailout, “will provide relief to the liquidity-starved Greek economy, but we believe that the country΄s debt burden remains unsustainable,” Dow Jones Newswires reported citing Moody΄s credit report.

“The probability of a further default on privately held debt is high, and given that around 70% of the total debt stock is held by official creditors, only a reduction in principal on outstanding official debt would lead to a semblance of sustainability in Greece΄s debt,” the ratings company said.” (Full Story)

Didn’t everybody say on Monday that the deal secures that Greece will remain in the euro zone?