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"Grexit"

If this doomsday prediction had materialized, the state of global financial markets would look vastly different now.

An inconclusive Greek election in May, which saw radical anti-bailout parties make big gains, led to strong speculation that days of its membership in the euro zone were numbered. The widely cited forecast of the indebted nation's exit was even assigned a nickname: 'Grexit' (a term coined by two Citi analysts). Prominent figures in the investment community, including the world's largest bond fund Pimco's CEO Mohammed El-Erian, were among the many naysayers. In May, El-Erian was quoted in the media saying a Greek exit was "inevitable," adding that investors should start preparing for it.

The government of Greece, which has debt levels projected to reach 190 percent of GDP in 2013, has struggled to implement the spending cuts and tax hikes required to lower its debt burden and secure its next round of bailout funds from euro zone countries and the International Monetary Fund, due to public opposition over the new policies.

However, the outcome of Greece's second election on June 17 – in which the pro-bailout New Democracy party claimed victory – alongside the parliament's approval of a tough 2013 budget in November has tempered fears of this doomsday scenario. Further progress was made last week, when euro zone finance ministers reached a deal to help reduce the country's debt levels, paving the way for the release of 43.7 billion euros in loans starting in December. Analysts expect this will fill the country's financing gap until 2014.

After the recent deal the International Monetary Fund head Christine Lagarde said Greece's debt is now heading back toward a "sustainable path." The "Grexit" debate, which was raging hot earlier this year, has since cooled off.

Photo: AFP | Getty Images