JPMorgan, Barclays cut Greek exit odds as Goldman-Citi hold

Economists from JPMorgan Chase & Co. to Barclays Plc made a Greek departure from Europe’s monetary union their base scenario, while those at Goldman Sachs Group Inc. and Citigroup Inc. saw ways it can remain within the bloc.

Investors are re-examining the odds on Greece’s membership of the euro after voters used Sunday’s referendum to reject the austerity needed to secure international aid. Even so, predictions of a so-called Grexit over five years of crisis have so far come to nothing as European authorities have regularly acted to keep the bloc whole.

“Although the situation is fluid, at this point Greek exit from the euro appears more likely than not,” Malcolm Barr, an economist at JPMorgan in London, said in a report to clients on Sunday, adding it could come “under chaotic circumstances.”

With Greek banks running out of euros after being shut in the run-up to the plebiscite and capital controls in place, Prime Minister Alexis Tsipras’s government has just a “handful of weeks” to negotiate a new aid deal, Barr said.

“Exit now is the most likely scenario,” Barclays analysts said in a separate report. “Agreeing on a program with the current Greek government will be extremely difficult for euro- area leaders, given the Greek rejection of the last deal offered, and will be a difficult sell at home.”

Morgan Stanley said that its analysts now reckon there is a 75 percent chance Greece leaves, up from 60 percent a week ago. BNP Paribas SA said the probability is at 70 percent, up from 20 percent. Societe Generale SA put it at 65 percent.

Capital Controls

Goldman Sachs reiterated that it still sees the euro area remaining a region of 19 countries despite the vote.

While the risk of Grexit has risen it could “still take months or even years to happen” and more likely is a situation in which the country and its creditors are in limbo, said analysts at Citigroup, which coined the Grexit term in 2012.

Teneo Intelligence, a London-based consultancy, gave the probability of Greece leaving the euro at 75 percent after the vote, while Evercore ISI in Washington saw it at about 67 percent in the next six months to a year.

Oxford Economics Ltd. increased the likelihood to 85 percent from 67 percent, while BMO Capital Markets said a departure is its base case.

Berenberg Bank Chief Economist Holger Schmieding said the country is still not quite on “autopilot” toward an exit, although the referendum result “makes it much more difficult to still avoid that fate.”

[Bloomberg]