Grexit Would Have Limited Direct Contagion For Other Sovereigns: S&P

A Greek exit from the eurozone would likely be accompanied by a default by Greece on official and commercial debt, but it would have limited direct contagion for other sovereigns, Standard & Poor's said Thursday. "All things considered, we believe that a Grexit would not lead to a degree of direct contagion that would drive other sovereigns out of the euro, not least because the eurozone rescue architecture is more robust than during the last Grexit scare in 2012," S&P credit analyst Moritz Kraemer said in a statement. In particular, the introduction of the European Stability Mechanism, which can offer support to eurozone sovereigns that would be hurt by a hypothetical Grexit, is a buffer, he said. At the same time, Greek's links with financial markets have been pared back sufficiently to make contagion unlikely. The statement came amid news reports that Germany has rejected Greece's request for a six-month loan-extension agreement, saying the letter is not "a substantial proposal for a solution." Those reports sent the euro lower, sent the main Greek stock index lower and caused Greek yields to spike higher.

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