A Reuters poll of economists showed that Greece will likely default on its sovereign debt within a year after it exhausts the patience of its euro zone partners, but there is only a one-in-five chance it will leave the 17-nation euro zone as some in Germany have called for.
Economists’ forecasts on the likelihood of a Greek default ranged from 25 percent to an absolute certainty.
Frustration has risen among core euro zone countries due to Athens’ inability to meet the fiscal targets set out under its international bailout, heightening market fears of a default or even Greece’s exit from the euro zone.
The poll of more than 50 economists across Europe, taken over the last two days, gave a 65 percent chance Greece would default with half of respondents saying it would do so in within 12 months.
While credit markets are pricing in a greater than 90 percent likelihood of default, it is significant that economists now also sense this outcome, since they try to see past the whims of volatile financial markets.
The poll also suggested that a joint euro zone bond, seen by many economists as the only option that will solve the debt crisis, still has a 40 percent chance of taking off even after Germany’s constitutional court effectively banned Berlin from taking part.
“In the absence of measures to ensure ongoing supply of liquidity to Greece, a debt default may be the only way to lance the boil which is building up in the markets,” said Peter Dixon, economist at Commerzbank in London.