Friday, June 15, 2012

Greek euro exit: some scenarios

by Jill Treanor


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.


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