Grexit would have ‘serious consequences’ for euro zone

Greece leaving the euro zone would have “serious consequences” for the euro zone as a whole and raise questions about what could lead other countries to leave as well, ratings agency Moody’s said on Tuesday.

Although euro zone governments are benefiting from cheaper borrowing costs thanks to the European Central Bank’s aggressive stimulus measures and were expected to see growth gradually recover in the coming months, some — such as France and italy — still face pressures on their credit ratings.

Greece’s junk Caa1 rating is currently on review for a further downgrade with the country future’s future in the euro zone uncertain under the government of Prime Minister Alexis Tsipras.

Athens has been embroiled for weeks in a confrontation with its euro zone creditors, led byGermany. It is struggling to find EU allies in its effort to renegotiate the terms of itsbailout. The worst outcome — Greece leaving, or “Grexit” — would have wide ranging implications, Moody’s said.

“Even if the immediate financial impact was limited, the exit of a member state from a union explicitly designed to be indivisible would inevitably raise questions about what pressures might cause other countries to take the same route,” Kathrin Muehlbronner, one of Moody’s senior credit officers, wrote in a new report.

Reuters

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Craig Erlam

Craig Erlam

Senior Market Analyst - UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam