By Cheyenne Hopkins
July 25 (Bloomberg) -- Citigroup Inc. raised its estimate for Greece leaving the 17-nation euro currency union in the next 12 to 18 months to about 90 percent, with prolonged economic
weakness and spillover for the euro area.
In an analyst note, Citigroup updated its forecast for a Greek exit from a previous estimate of 50 percent to 75 percent, and said it would most likely happen in the next two to three quarters. Specifically, the bank assumes a Greece exit would occur on Jan. 1, 2013, while saying that is not a forecast of a precise date.
Greece’s so-called troika of international creditors, the European Central Bank, the European Commission and the International Monetary Fund, are in Athens this week amid doubt the country will meet its bailout targets and reluctance among Germany and other euro-area states to put up more funds should Greece fail to do so.
“Our base case is for prolonged economic weakness and financial market strains in periphery countries, spilling over into renewed recession for the euro area as a whole this year and the next,” the Citigroup note said.
Citigroup also said that even with the Spanish bank bailout, both Spain and Italy are “likely” to enter some form of bailout by the end of 2012.
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