Greece may quit the euro zone as soon as 2013’s first half, said Megan Greene, director of European economics at Roubini Global Economics LLC.
Current austerity steps and likely retrenchment would create a “decade of depression,” so the country may decide to default on its debt and reissue the drachma, Greene said today at a conference in London. A Greek exit is “very likely” before 2013 ends, she said. The euro-area economy may shrink 0.4 percent in 2012 and 0.6 percent next year, according to Greene.
“I don’t think the plan to continue to cut wages and pensions is socially or politically tenable” for Greece, Greene said. “Greece could choose to exit the euro zone, reissue the national currency, have it devalue massively and regain competitiveness much more quickly and return to growth.”
Finance Minister Yannis Stournaras told lawmakers in Athens today Greece needs a two-year extension to meet its bailout targets. The indebted nation sold 13-week Treasury bills at a yield of 4.24 percent.
Greece is likely to exit the euro area in “a managed, negotiated affair, much like an amicable divorce,” Greene said. She said there’s less chance of a unilateral default on its debt, an outcome that “could spark cascading bank and sovereign defaults across the euro zone,” according to Greene.