Dangerous Thinking on Greece Exit Risks

A perception in financial markets that Greece exiting the euro zone would have limited knock-on effects is misguided, some analysts say.

Euro zone officials meet in Latvia this week to discuss a rescue deal between Greece and its creditors amid growing talk that time is running out for Athens to avoid defaulting on its debt and being ejected from the 19-member euro zone.

“UBS does not believe, as its base case that Greece, will leave the euro,” Paul Donovan, UBS global economist, said in a video published by the bank’s research team.  “However, there seems to be a belief in financial markets that if Greece were to be forced from the euro area it should be regarded as an isolated incident,” he said. “This belief, seems to us, to be dangerous.”