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Greece Euro Exit Best Answer to Crisis, BNY Mellon Unit Says

Kicking Greece out of the euro is the best way to end the volatility in European markets and help the region’s economic recovery, according to a study by Bank of New York Mellon Corp.

“We have believed for some time that Greece’s withdrawal from the euro zone is inevitable and all plans introduced until now have simply been about building enough time for the European financial system to prepare for this eventuality,” Paul Brain, investment leader for fixed income at Newton, a BNY Mellon asset-management unit in London, said today in a statement on PRN. “With the possibility of a Greek default becoming more likely every day, time has run out.”

Brain estimated that the default resulting from Greece leaving the euro zone would have a 40 percent recovery rate. The move would cut the Greek deficit to a more sustainable level and strengthen the euro, he said.

“The hit to the Greek economy would be huge, but would it be any worse than the present situation of depression and growing deficits?” Brain said in the statement.

Greek two-year notes today erased a decline, pushing the yield on the securities down 150 basis points, or 1.50 percentage points, to 75.23 percent at 9:10 a.m. in London. The yield earlier climbed 779 basis points to a euro-era record of 84.52 percent.

Brain is portfolio manager of the $942 million BNY Mellon Global Bond Fund, which is based in Dublin. The fund, which holds mainly sovereign debt, returned 7.4 percent annually for the past five years, beating 89 percent of peers, according to data compiled by Bloomberg.

Newton oversees $76 billion. BNY Mellon manages $1.3 trillion.

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