Credit rating agency Moody’s has said that political turmoil and early elections in Greece have raised the chance that the country could leave the Eurozone – but this remains a low risk.
In a new report entitled Greek Exit Would Be Credit Negative for other Member States; but Contagion Risks are Lower Than in 2012, Moody’s Investor Services also claimed that negative credit implications would spill into other states as a result of a Greek exit, but that these contagion risks are lower than at the peak of the Greek upheaval, in 2012.
Should the anti-austerity party Syriza succeed in winning a majority in the January 25th elections, it says that it will ask for debt forgiveness from its EU counterparts – and this will almost certainly be refused. Some had speculated that the country could be forced out of the Eurozone as a result, but neither investors nor rating agencies seem too worried about this possibility.
“Any exit from the single currency would be a defining moment for the euro: it would show that the monetary union is divisible, not irreversible,” said Colin Ellis, Moody’s chief credit officer for Europe, the Middle East and Africa (EMEA), who authored the report.
“However, although a Greek exit today would likely trigger renewed recession in the remaining euro area, the credit impact may be less pronounced than in 2012 because contagion risk from a Greek euro exit has materially declined and because policymakers now have stronger tools to limit the damage from such an event,” he said.
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