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RIP Grexit? Citi says it no longer believes Greece will leave the EU

Emma Haslett
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Greeks Demonstrate After Eurozone Debt Deal
Grexit may be over, but Greece isn't out of the woods (Source: Getty)

Remember Grexit, the EU-changing event that didn't happen before Brexit did (almost) happen?

Citi, the lender whose chief economist coined the term, has said it is now so unlikely it is removing it from its baseline scenario. RIP Grexit.

In a note today analysts said although bailout negotiations between Greece and its so-called troika of creditors - the European Central Bank (ECB), the eurozone and the International Monetary Fund (IMF) - have resumed, the political backdrop has radically changed so it is "less conducive to very negative outcomes".

"Therefore, we remove from our baseline scenario our long-standing call for Greece leaving the euro area in the next one to three years."

"While we still think the third bailout programme is likely to fail in restoring Greece’s financial sustainability, we reckon the political backdrop both in Greece and in Europe has become less conducive to very negative outcomes. We therefore remove from our baseline scenario our long-standing call for Greece leaving the euro area in the next one to three years."

Not out of the woods

That doesn't mean it's out of the woods quite yet: earlier this week the country's employment minister, George Katrougalos, warned the IMF it could no longer tolerate its "extreme" calls for reforms to the minimum wage, pensions and collective bargaining rules.

Last summer the country struck a deal with the troika under which it was handed €86bn (£73.4bn), but the IMF was not part of the most recent bailout deal, under which Greece was handed €10.3bn.

The IMF has urged Greece to take control of its minimum wage and make it easier for firms to dismiss employees, but Katrougalas has rejected its suggestions.

"If we need to take measures in the future, we will discuss them with our European partners," he said earlier this week.

"Our positions and the IMF positions are so chaotically different."

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