Author: CHUNG Yoon Ngan
Date: 06-05-12 18:51
S&P: 1 in 3 chance Greece exits euro zone
June 5, 2012 - 11:57am http://www.chinadailyapac.com
A 1 euro coin made in Greece and a pile of eurocents on the European flag. (Photo by Agencies)
Ratings agency Standard & Poor 's said Monday there was at least one-in-three chance Greece would leave the euro zone following its national elections on June 17.
S&P said in a statement, "This could be brought about by Greece rejecting the reforms demanded by the troika -- the European Commission, International Monetary Fund, and European Central Bank -- and a consequent suspension of external financial support."
The ratings firm said such an outcome would seriously damage Greece's economy and fiscal position in the medium term and most likely lead to another Greek sovereign default.
But S&P suggested that the other debt-ridden euro zone countries were unlikely to follow Greece's exit. It said a Greek withdrawal would not automatically have any permanently negative consequences for other peripheral sovereigns' prospects of continuing euro zone membership, and a Greek exit would not automatically trigger further sovereign ratings downgrades elsewhere.
After Greece's national elections on May 6 left the country struggling to form a new government, speculations about "Grexit" kept rising.
Greece's conservatives, who support the country's internationally funded bailout program, continued to command a wafer-thin lead in the last public-opinion polls published before the second round of elections, while the left parties, who were against austerity plans requested by the international lenders, gained supports.
Without austerity plans, the external lenders would refuse to offer any more aid funds, which could result in a payments crisis by late June in Greece.