Capital Econ: Why Are Markets Relaxed About A Grexit?

Capital Economics’ European Economics Update this week focuses on the threat of a Grexit and the markets relaxed attitude towards the Grexit threat.

Rising expectations

Rising expectations of a Greek exit from the euro-zone are still not prompting contagion effects or general concerns about the region’s economy. While there have been some signs that the Greek crisis was starting to affect other European nations, although as Capital Economics has noted, declines primarily reflected slight deterioration in sentiment and expectations, rather than in actual economic conditions.

Grexit - Increasing threat

The Sentix Euro Break-up index, which gauges investors’ views on the probability of a country leaving the union within the next 12 months, hit 49% during April, up from 37% the month before. This...