Moody’s warns of Grexit threat to Eurozone

 
Chris Papadopoullos
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A GREEK exit from the Eurozone – or Grexit – would have “serious consequences” for the currency union, a major ratings agency said yesterday.

Many analysts have suggested that the rest of the Eurozone are well insulated from a Grexit as European banks have cut their lending to Greeks. But Moody’s said the situation went beyond finance and into politics.

“Even if the immediate financial impact was limited, the exit of a member state from a union explicitly designed to be indivisible would inevitably raise questions about what pressures might cause other countries to take the same route,” said Kathrin Muehlbronner, a senior credit officer at Moody’s.

One of the most prominent risks was that other countries in the southern periphery – Italy, Spain and Portugal – would face of greater likelihood of leaving themselves, pushing up their interest on their bonds.

France was also singled out by Moody’s for having made poor progress with reforms to its economy. France recently had its budget deficit reduction deadline extended by the European Commission.

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