Risk of Greek exit from the Eurozone rises amid possible Syriza election victory, according to Moody’s
"Grexit" has been resurrected as the buzzword du jour lately, amid political instability and the rise of the far left party Syriza.
Now ratings agency Moody's has warned that the heightened risk of a Greek exit from the Eurozone "could have negative credit implications for other members of the European single currency". However, the risk of contagion is substantially lower than it was at the start of the crisis.
Commenting on the upcoming Greek election, where Syriza currently leads in the polls, Moody's said:
While Syriza is committed to the monetary union, it has also signaled that it could seek debt forgiveness from its euro area peers. Other euro area governments are likely to reject such a request, partly because it could lead to similar demands from other highly indebted euro area countries.
Moody's chief credit officer, Colin Ellis added:
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.
A Grexit would probably trigger another recession in the Eurozone. Even if Greece left the currency bloc, the Eurozone's troubles would be far from over. Italy and a host of other countries continue to suffer cripplingly high debt burdens and mass unemployment.
Should Greece decide to leave the Eurozone, the results in the longer term could be good news for ordinary Greeks:
Over the longer term, economic growth in Greece following an exit could exceed that in remaining euro area countries — which, in turn, could trigger discussions around further euro exits.