No Greek Exit This Year: Strategist
There’s little chance that Greece will leave the euro zone by the end of the year and a solution to the country's problems should focus on the top-slicing of its debt, Steven Major, Global Head of Fixed Income Strategy at HSBC told CNBC.
Major was reacting to a research note written on Thursday by Willem Buiter, Chief Economist at Citi.
Buiter, who coined the term "Grexit" back in May, believes there is now a 90 percent chance of Greek exit over the next 12 to 18 months, with a date being most likely in the next two to three quarters.
“I don’t think it’s going to happen. It’s not particularly helpful to anyone for it to happen in the next few months,” Major told CNBC’s “Worldwide Exchange” but conceded that a Greek exit before mid-2013 would be a time horizon that would suit some of the European authorities.
“We need to get through the implementation of the ESM (European Stability Mechanism),” he said.
“It’s very dangerous that the market keeps focusing on one thing at a time like this, it’s the nature of markets of course, but creating more money, leveraging the ESM, is not the solution - it’s part of a longer term solution.”
Top-slicing sovereign debt, lowering interesting rates for Greece and increasing its loan terms would be tactics that Major would like to see employed.
Haircuts for the official sector, such as the ECB (European Central Bank) or EIB (European Investment Bank), are other solutions Major provided, but he believes this would involve recapitalization and would be counter-productive.
“There seems to be this view building up in Europe amongst certain people that Greece is now ready to go and that the banks have immunized themselves of the risk,” he said.
“So French and German banks [who] held lots of the paper before, they’ve made provisions, they’ve taken haircuts, they’ve sold the bonds whatever - I think that would be a naive view to take frankly.”
He concluded that he didn’t know how an exit would be managed, but reiterated that he didn’t think it would happen any time soon.