Greece has 1-in-3 chance of leaving eurozone: S&P

However, Standard & Poor's notes that the potential impact on other peripheral sovereigns in the eurozone would be less clear cut. Standard & Poor's Ratings Services on Monday published a report that examines the likelihood of Greece leaving the eurozone and the potential impact of this on the creditworthiness of other sovereigns in the region. The report is titled "Sovereign Rating Implications Of A Possible Greek Withdrawal From The Eurozone." "We believe there is at least a one-in-three chance of Greece exiting the eurozone in the coming months, following national elections on June 17. This could be brought about by Greece rejecting the reforms demanded by the troika - the European Commission, International Monetary Fund (IMF), and European Central Bank (ECB) - and a consequent suspension of external financial support," Standard & Poor's said in a statement. "Such an outcome would, in our view, seriously damage Greece's economy and fiscal position in the medium term and most likely lead to another Greek sovereign default," the credit rating agency said. However, Standard & Poor's notes that the potential impact on other peripheral sovereigns in the eurozone would be less clear cut. It believes that other sovereigns would be unlikely to follow any Greek exit, having witnessed the resulting economic hardships and long delay in harnessing benefits from national currency devaluation, and that in the meantime their European partners would provide additional support to discourage further departures. The Standard & Poor's report says that European policymakers would be keen to demonstrate that Greece is a special case. "We would expect growing financial support and leniency in the face of slipping targets for other sovereigns embroiled in the debt crisis," Standard & Poor's said. Accordingly, the ratings firm currently does not consider that a Greek withdrawal would automatically have any permanently negative consequences for other peripheral sovereigns' prospects of continuing eurozone membership. For the same reasons, it is Standard & Poor's base-case assumption that a Greek exit by itself would not automatically trigger further downward sovereign rating actions elsewhere. Subsequently, much would depend on the robustness of the response from European policymakers, the ECB, and the IMF. S&P expects that a Greek exit would likely strengthen the resolve of other countries receiving external support to pursue reforms and avoid the economic consequences of an exit, and it considers it likely that the ECB would respond vigorously to any sustained rise in borrowing costs for other sovereigns. However, S&P believes the response of core eurozone member states is less predictable. Without appropriately sized and flexible financial mechanisms, the likelihood of a lasting restoration of confidence in major eurozone financial institutions over the near term is doubtful, especially at the periphery. "Although such a reluctant policy response is not our base-case assumption, it could lead to further sovereign debt restructurings in countries other than Greece and downward pressure on our ratings on affected sovereigns," says S&P. The S&P report also examines the potential losses that official creditors might face, including the IMF, European Financial Stability Facility (European Financial Stability Facility, and European Investment Bank European Investment Bank, in the event of a Greek exit.