Citigroup's top economist Michael Saunders has forecast Greece will exit Europe's single currency on 1 January 2013, and its new currency will immediately depreciate by 60%.
Saunders based his views on the belief any Greek government formed from elections on 17 June will fail to implement the appropriate austerity measures.
A note to clients put the likelihood of Greece leaving the euro, or ‘Grexit’, in the next 12 to 24 months at between 50% to 75%.
“We assume Grexit occurs on 1 January, 2013, with Greece staying in the EU and receiving external loan support.”
Saunders added the exit will unleash a massive but manageable wave of contagion across Europe.
“We expect that Grexit will be followed by a series of policy responses aiming to prevent a domino-style collapse of the banking system and escalating economic disruption.”
