Analysis: Eurozone 'will remain intact'

17 May 2012, 6:57 pm   -   Source: SBS Staff

ANZ experts say despite the deepening Greek crisis, there's a 70 per cent likelihood that the Eurozone will remain intact.

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ANZ experts say despite the deepening Greek crisis, there's 70 per cent likelihood that the Eurozone will remain intact, as the risks and coasts of an exit are too high for other countries.

If Greece were to leave, ANZ tips a four per cent chance of a disorderly exit - one that could see the Eurozone permanently damaged.

ANZ senior economist Tom Kenny says an orderly Greek exit would take at least 12 months.

"I would think that any exit, if it's orderly, would take some time. They would manage that very carefully, and there would be a lot of close collaboration between governments around the world on how best to manage this".

He says a two per cent drop in the Australian share market yesterday and a fall of the Australian dollar in recent weeks are due to the Greek crisis but also to diminishing confidence in China's economic strength.

"People can't see the end game scenario for Greece at the moment, so they are postulating for quite bad scenarios, and I guess the other big driver for the Australian market has been Asia and particularly China, and the news from China in recent months have not been so encouraging, so it's maybe slowing a bit faster than anticipated".

He says a disorderly exit could impact the Australian economy as well.

"If we have a managed and orderly exit, that could be potentially beneficial for the global economy for a little while, but if it was a disorderly exit, that could be potentially disastrous, and what we would see around the world, I think, would be central banks doing their best to support the global economy, by cutting interest rates and putting a lot of liquidity back in the system".

ANZ , Greek Crisis

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