Threadneedle sees Greek eurozone exit in a year

Greece will probably leave the eurozone within the next year and more countries may follow as austerity measures dictated by Germany prove too tough to implement, according to Threadneedle Investments. “Our endgame scenario is that there’ll be a number of exits,” Mark Burgess, chief investment officer of Threadneedle, which manages 73 billion pounds ($117 billion), said at a press conference in London on Wednesday. “I suspect that Greece will leave within 12 months.”

Greeks are readying themselves for a general election next month and Prime Minister Lucas Papademos last week urged voters to choose the path that secures the country’s place in the currency bloc.

“Greece has two options: It’s terrible and the Germans are telling us what to do; or, it’s terrible and we are in control of our own destiny,” Burgess said. “I think they will choose the latter.”

A Greek exit, even if followed by other peripheral countries, wouldn’t be the end for the euro as the economies are small in comparison to the whole region, Burgess said, without identifying other nations that may leave. The euro would fail if Spain or Italy were to quit the currency bloc, he said. Threadneedle, the London-based unit of Ameriprise Financial Inc, bought European financial stocks and investment-grade high-yield bonds in the fourth quarter following the European Central Bank’s longer-term refinancing operation (LTRO), which flooded the region’s banks with cheap money. The Stoxx 600 Index rallied 10 percent from the start of December through the end of March. The investment manager is reducing these positions as the effect of the LTRO eases, Burgess said. The money manager has increased its cash holdings to “overweight” as part of its bearish view on global economic growth, he said. [Bloomberg]

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