Tags: Roubini | Greece | Chaos | France

Roubini: Greece Headed for Chaos but France Will Survive

Monday, 07 May 2012 11:36 AM

Weekend election results reveal that Greece is headed for chaos and default while a socialist victory in France won't bring about sweeping change, New York University economist Nouriel Roubini says in a series of tweets on his Twitter page.

In France, socialist Francois Hollande swept into victory over Nicolas Sarkozy, a move seen as a proxy on the outgoing administration's support for belt-tightening austerity measures.

In Greece, established political parties failed to secure even 50 percent of the votes in parliamentary elections, with far-left and far-right parties gaining popularity.

Worry more about the latter.

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"Result of Greek elections much more serious than the French one as the former leads to chaos while Hollande will turn out to be a moderate," Roubini says on his Twitter page.

"Greek membership in [eurozone] is now at risk with serious contagion risks for the rest of the periphery. [Eurozone] policy uncertainty now sharply higher."

Greece will probably end up defaulting.

"I have been saying for two years now that Greece is highly likely to exit the eurozone. Now Citi says that probability is 50-75 percent by end 2013."

Roubini was referring to a post-election study issued by Citi economists, which put the possibility of a Greek default and exit from the eurozone as high was 75 percent.

Greek voters will likely be asked to vote again, which could result in a new government rejecting austerity measures imposed on Athens in exchange for bailout money arranged by the so-called "troika" of the European Commission, the European Central Bank and the International Monetary Fund.

"With the outcome of the election, to us the probability of a Greek exit is now larger than our previous estimate of 50 percent, and rises to between 50-75 percent," Citi analyst Guillaume Menuet writes in a research note, according to CNBC.

Don't expect a Greek exit to destroy the entire currency zone.

"We regard the probability of a broad-based break-up of the monetary union as very low. We continue to expect that in reaction to Greece leaving the euro area, more far-reaching measures from governments and the ECB would be put in place."

Editor's Note: The Final Turning Predicted for America. See Proof.

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