• 518 days Will The ECB Continue To Hike Rates?
  • 519 days Forbes: Aramco Remains Largest Company In The Middle East
  • 520 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 920 days Could Crypto Overtake Traditional Investment?
  • 925 days Americans Still Quitting Jobs At Record Pace
  • 927 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 930 days Is The Dollar Too Strong?
  • 930 days Big Tech Disappoints Investors on Earnings Calls
  • 931 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 933 days China Is Quietly Trying To Distance Itself From Russia
  • 933 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 937 days Crypto Investors Won Big In 2021
  • 937 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 938 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 940 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 941 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 944 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 945 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 945 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 947 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

Sudden Stop Thesis: What Are the Odds of Grexit Within Three Weeks?

Four years ago I thought odds of an eventual Grexit were nearly certain. Some people still don't believe so, while others are just beginning to understand the obvious.

Former Pimco Co-CEO El-Erian Sees 85% Grexit Odds With 'Massive' Contraction Coming.

Greece is heading for a "massive economic contraction" and is likely to be forced out of the euro zone, according to Mohamed El-Erian, the former chief executive at Pacific Investment Management Co.

"There's an 85 percent probability that Greece will be forced to leave the euro zone" in the next few weeks, El-Erian said in an interview from New York. "What we are seeing here is what economists call the sudden stop, when the payment system stops. The logic of a sudden stop is a massive economic contraction, social unrest and it's going to make continued membership of the euro zone very difficult for Greece."


Sudden Stop Thesis

While I still think it likely Greece will exit the eurozone, I will take the "over" line on a "few weeks". It is amazing how long these things drag out.

There are at least two wildcards in play that could prolong things. At the top of the list is Russia. Second in line is the US.

Why? Because the US does not want Greece to form serious ties with Russia.

Also, Merkel does not want Grexit on her watch.


Russia the Key

Meanwhile, and as I have been saying for months, Russia is the Key. Will Russia come to aid Greece with enough money and oil to enable Greece to hang on longer than a few weeks?

I suspect the answer is yes. If so, the price may be sanctions.

EU rules require unanimous agreement on sanctions. I expect Greece to play that card very well. Greece can and likely will torpedo EU sanctions on Russia by the end of the year.

Unless there is an immediate collapse in Greece starting now, look for Russia to keep Greece afloat until sanctions are lifted.

 

Back to homepage

Leave a comment

Leave a comment