Fitch: Grexit a real danger, but chain reaction unlikely

The eurozone would suffer a significant shock if Greece left, but it would be unlikely to trigger a systemic crisis like that in 2012

The international ratings agency Fitch released a statement of Friday warning that Greece’s exit from the eurozone is still possible. However, such a development is unlikely to cause a systemic crisis like the one threatened in 2012, Fitch notes.

“The eurozone would suffer a significant shock if Greece left, but it would be unlikely to trigger a systemic crisis like that in 2012, or another country’s rapid exit,” Fitch states.

“The immediate risk of Greece leaving the single currency was eased by last month’s agreement with its official creditors,” says the statement, adding that the “uncompromising stance taken by both sides at times before the agreement highlights the possibility of a future policy mistake.”

“Grexit is not our base case, but will remain a risk as more detailed negotiations take place, and as the Greek government tries to maintain domestic support for the deal it secures,” the rating agency underlines.

The statement also mentions that “the eurozone has developed mechanisms to prevent a run on sovereign leading to a sovereign default, and to alleviate sovereign-to-sovereign contagion, and concerns about other eurozone sovereigns’ creditworthiness are less pronounced than in 2012.”

Therefore, “a chain reaction from Grexit to the ultimate breakup of the bloc is therefore unlikely,” according to Fitch’s statement.