June 17, 2021



JPMorgan to Barclays See Greek Euro Exit Likeliest Scenario

Economists from JPMorgan Chase & Co. to Barclays Plc made a Greek departure from Europe’s monetary union their base scenario after the country’s electorate rejected the austerity needed to secure international assistance.

“Although the situation is fluid, at this point Greek exit from the euro appears more likely than not,” Malcolm Barr, an economist at JPMorgan in London, said in a report to clients on Sunday, adding it could come “under chaotic circumstances.”

Economists will be reexamining the odds on Greece’s membership of the euro after voters used a referendum to balk at proposals for more spending cuts and tax hikes from its creditors. Undermining their projections is the fact that many had predicted the Greeks would back the bailout pact.

“Exit now is the most likely scenario,” Barclays analysts said in a separate report. “Agreeing on a program with the current Greek government will be extremely difficult for euro-area leaders, given the Greek rejection of the last deal offered, and will be a difficult sell at home.”

Capital Controls

With Greek banks running out of euros after being shut in the run-up to the plebiscite and capital controls in place, Tsipras’s government has just a “handful of weeks” to negotiate a new aid deal, Barr said.

There will be a temptation to call another national vote on membership of the euro and to begin issuing alternative legal tender in the meantime, the analyst said. JPMorgan a week ago attached a 60 percent probability to the austerity measures being supported.

Teneo Intelligence, a London-based consultancy, put the probability of Greece leaving the euro at 75 percent after the vote, while Evercore ISI in Washington put it at about 67 percent in the next six months to 12 months.

Oxford Economics Ltd. increased the likelihood to 85 percent from 67 percent, while BMO Capital Markets said a departure is its base case.

Berenberg Bank Chief Economist Holger Schmieding said the country is still not quite on “autopilot” toward an exit, although the referendum result “makes it much more difficult to still avoid that fate.”


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