JP Morgan: ‘Messy Greek exit now more likely than not’
Stephanie Flanders, market strategist at JP Morgan has said that Grexit is now more likely that not.
She writes: “With this “no” vote we have moved firmly onto the Grexit side of the decision tree, with a messy Greek exit now more likely than not.
“We can expect this to cause volatility and sell-offs in European markets and potentially very serious long-term political implications for Europe.
“However, assuming that policymakers respond reasonably decisively to signs of contagion, we do not currently believe the result poses a broader risk to European investors or the European recovery.
She added: “A Greek exit from the Euro would be costly to Europe’s taxpayers – and legally very messy to the extent that it is likely to involve heavy losses for the ECB.
“It would also have important long-term consequences for the Eurosystem and the future risk premium on Eurozone assets and also raise more immediate geopolitical concerns if Greek membership of NATO or the European Union was brought into question. These risks are literally incalculable, but they can hardly be ignored.
“All that said, however, we do not believe the crisis poses major immediate risks to peripheral economies, the European financial markets or the eurozone recovery, all of which are now much less exposed to and better equipped to deal with Greek contagion than they were in 2011 and 2012.”