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Greek exit would have muted impact: S&P

Greek exit would have muted impact: S&P

Ratings giant Standard & Poor’s has poured cold water on a disaster scenario should Greece leave the euro as last-ditch bailout talks rattle on.

The euro has fallen today after reports suggested Germany’s finance ministry had rejected a proposal by Greece for an extension to its €172bn (£126.9bn) bailout.

S&P said the impact of an exit by the Greeks would not impact the market to the same level it did when there were fears the country could leave in 2012.

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“All things considered, we believe that a ‘Grexit’ would not lead to a degree of direct contagion that would drive other sovereigns out of the euro, not least because the eurozone rescue architecture is more robust than during the last Grexit scare in 2012,” said Standard & Poor’s credit analyst Moritz Kraemer.

The report said that the exit of the country would be followed by a payment default by Greece on both its official and commercial obligations.

Mr Kraemer said: “We believe that the financial burden of a Grexit on the remaining 18 eurozone sovereigns would be moderate and absorbed over decades, and we therefore do not expect that a Grexit by itself, would have significant rating implications for these sovereigns”.

The likelyhood of an exit is increasing though. Greece formally applied for a sixth-month extension of its loan and a renegotiation of some of its terms. However, reports have circulated that the German finance minister has rejected the Greek’s latest application for extension.

This caused markets to tremmor and the euro fell 0.2 per cent against the dollar to $1.13.

Still, the fear of the implications of a Grexit is lighter than that of the last scare in 2012, according to the S&P report.

Since that time the policymakers have introduced the European Stability Mechanism (ESM), which can financially support the sovereigns if there is market pressure in the case of a Grexit.