Greece is still likely to leave the eurozone, according to leading economists, but it could take several years as the European leaders resolve to save the debt-laden country has been underestimated.
Nouriel Roubini, nicknamed Dr Doom for correctly predicting the 2008 global financial crisis, said commentators had underestimated the resolve of the Greeks and European leaders said the Greek exit from the 17-nation bloc was now a “less likely event this year, although not a zero possibility”.
The economist now believes there is a 30pc chance of the debt-laden country leaving the eurozone, but that increases to a 50pc chance of an exit in the next three to five years.
“Politics don’t trump everything,” Mr Roubini told Bloomberg . “It’s a factor, but it’s not as if it overrides everything else.”
In December, Standard & Poor’s raised Greece’s credit rating six notches to an 18-month high due to “the strong determination” of the eurozone to help the struggling member state.
Mr Roubini warned that the debate over a Greek exit easily could reignite by the end of the year after Germany’s election, if Greece’s coalition government wobbles or if Spain and Italy appear less at risk of contagion,
Dr Doom was not alone in his forecast of a Greek exit. Pimco’s chief executive Mohamed El-Erian noted that there were still major problems in Greece, with the country unable to generate growth or jobs.
Recent figures out of Greece’s state statistics agency showed that youth edged closer to 60pc in October, with the country's unemployment rate hitting a new high of 26.8pc in October
Greece's jobless rate has almost tripled since September 2009 as the country's debt crisis emerged, and is more than double the average rate in the 17-nation euro zone, which stood at 11.8pc in November (Xetra: A0Z24E - news) .
“[Greece] is also unable to obtain the type of official debt relief that is needed to lift the debt overhang. Medium-term sustainability will remain elusive,” Mr El-Erian said in emailed comments to Bloomberg.
Barry Eichengreen, a professor at the University of California in Berkeley told Bloomberg that while many people overestimated the likelihood of a Greek exit, “now the danger goes in the other direction, in that markets are too sanguine that the volatility and political noise is behind us”.
“I do not think the period of calm will last,” he said.
Earlier this week, the International Monetary Fund said Greece would need additional help from its European partners as soon as next year to bring its huge debt under control.
"There is a gap according to our preliminary projections for 2015-2016" of up to "€9.5bn," Poul Thomsen, the IMF's mission chief for Greece, told a conference call.
The EU and IMF have committed a total of €240bn in rescue loans to Greece since 2010, but with its economy entering a sixth year of recession it is still having trouble making budget ends meet.
Despite the two EU-IMF bailouts as well as a private-sector debt cut, the continuing recession and deficits mean that Greece's debt mountain is set to continue to rise to 190pc of output in 2014.
The IMF has been pressing Europe to do more to resolve the Greek debt crisis, after the Fund extended its Greek rescue loan to four years from three years and lowered the interest charged on it.
Eurozone countries have so far ruled out writing off any of the bailout loans they have provided Greece.