S&P: 1-in-3 chance Greece leaves euro

@CNNMoneyInvest June 4, 2012: 4:36 PM ET
parthenon-eu-flag.gi.top.jpg

NEW YORK (CNNMoney) -- There is a one-in-three chance Greece will leave the euro currency union in the months ahead, according to Standard & Poor's.

The ratings agency issued a report Monday that examines the likelihood of Greece leaving the eurozone and how an exit would impact the creditworthiness of other euro area governments.

S&P warned that Greece could lose its financial lifeline if voters elect a government that opposes the terms of Greece's bailout program. Greece is set to hold an election June 17 after last month's voting failed to result in a governing coalition.

However, S&P said that if Greece abandoned the euro, other euro area nations would be unlikely to follow suit.

S&P argues that the hardships Greece would suffer by reverting to its own currency would dissuade other nations from following suit. In addition, European leaders would be eager to demonstrate that Greece is a special case and would act quickly to support other struggling governments.

S&P said leaving the euro and bringing back the drachma would "seriously damage" the Greek economy and that it would take years for Greece to realize any benefits from devaluing its currency.

"In our opinion, adopting a national currency is likely to be very costly for the Greek population," the report states.

S&P warned that the European Central Bank and central banks in the eurozone have total exposure to Greece of about €200 billion. But the agency said a default by Greece would not undermine the central bank's credibility or the reserve currency status of the euro.

Meanwhile, the IMF will probably be able to avoid losses on its €20 billion loan by enforcing its "preferred creditor status" if Greece defaults, according to the report.

But the European bailout fund will likely "face significant losses," said S&P. The European Financial Stability has long-dated exposure of €108 billion to Greece. To top of page

Index Last Change % Change
Dow 16,805.41 127.51 0.76%
Nasdaq 4,483.72 30.92 0.69%
S&P 500 1,964.58 13.76 0.71%
Treasuries 2.27 -0.00 -0.09%
Data as of 2:03am ET
Company Price Change % Change
Ford Motor Co 13.78 -0.62 -4.31%
Microsoft Corp 46.13 1.11 2.47%
Apple Inc 105.22 0.39 0.37%
Bank of America Corp... 16.72 0.12 0.72%
Yahoo! Inc 43.50 0.90 2.11%
Data as of Oct 24
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.98%3.95%
15 yr fixed3.05%3.05%
5/1 ARM3.32%3.71%
30 yr refi4.05%4.03%
15 yr refi3.12%3.11%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.