Friday, June 15, 2012
Greek euro exit: some scenarios
June 15, 2012
Greece stays in the euro
Stock markets: The markets respond with a short "relief rally", then its back to the flat/volatile markets of the last two years . The initial rally is 5-10%.
Bank deposits: Stabilise, as companies and individuals become less nervous and stop withdrawing cash,
Government costs of borrowing: Should start to fall. Spanish 10-year bond yields (the interest rate the government has to pay) should fall back to 6% after reaching euro-era highs above 7% last week. Italian gov ernment bond yields should fall to 5.4%.
Euro: Rallies to $1.32 (vs $1.26 now)
The cost: Around €134bn (£108bn) on the basis that the Greece government negotiates softer bailout terms - resulting in a 75% haircut for holders of Greek government debt.