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BofA-ML On Greece: Default Risk Remains Remote

“The default risk remains remote, in our view,” Merrill Lynch says about Greece in a report dated 27th November.

The firm notes that Greece is one of the weakest of all Eurozone members and has much less of a financial, real estate or overall economic crisis “than, say Ireland in our view. The Greek crisis is one of public finance.”

It also noted that the political will in Athens to tackle the fiscal issues decisively is still unclear, with  the UK and Ireland scoring better on that count.

“In some respects, Greece may be the black sheep of the Euro family, with a bad fiscal position and questionable statistics, but it is still a member of the family.” The brokerage notes that the rest of EU states  cannot afford to let one of the family go down the drain, and in the very unlike case that Greece would need help, its Euro partners would provide for it.

“The risk of an actual government default in Greece looks very remote in our view. The holds even more so for other scare scenarios apparently floating around in the market, such as the one that Greece may be forced to leave the Eurozone. We know from experience that spread widening can go far beyond what economic fundamentals may warrant. So be it. But the economic and political fundamentals do not indicate any significant risk of a Greek default, in our view,” the report notes.
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