The Citigroup economist who in 2012 coined the term Grexit to describe Greece’s possible Eurozone exit says the new fear is “Grimbo.”
Ebrahim Rahbari, who last year said there was a 90 percent chance of Greece being forced out of the financial bloc says the worry is back, but he calls it Grimbo.
He told Bloomberg TV that it’s “for those grey scenarios where Greece isn’t going to get money from the Europeans and there’s no resolution for a durable horizon.”
Greece and the troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) has been wrangling since Feb. 20, when the country got a four-month bailout extension, over undone reforms and as money is running out.
With mixed signals from the government, a series of missed deadlines, and ongoing confusion over what’s going on, Rahbari said all that has created Grimbo and accompanying worry.
He sees two scenarios. In the first, a new aid deal is set but only after the imposition of capital controls and a possible default. This could happen if bailout negotiations fail to produce a result until, say, the ECB limits the flow of emergency loans to Greek banks.
“The shock could provide an extra push on both sides to conclude the negotiations,” Citigroup economists told clients in a report this week.
Grimbo could also happen if there’s no new aid, the government defaults, capital controls are introduced and IOUs are issued yet Greece still hangs on to the euro.
“Over time, the stressed liquidity situation, and notably deposit-withdrawal restrictions for banks, would significantly increase pressure on the Greek government, making fresh elections likely,” said Citigroup.
“Those could produce a mandate for a new bailout agreement with the euro zone or pave the way for an eventual Grexit, but this could still leave Greece in limbo for an extended period of time.”