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Betting on the Greek Tragedy

As of this morning, it looks like Greece has secured (yet another) bailout and debt-restructuring agreement. The €130 billion deal will cost bond holders a 53.5% write-down (“haircut”). The plan aspires to reduce Greece’s debt to 120.5% of gross domestic product by 2020.

What are the odds that Greece will leave the Eurozone?

Economists aren’t sold on deal. The deal is based on Greece becoming more competitive through across-the-board wage cuts which would set off an export boom. Investors aren’t holding their breath for a Greek export boom in the next few years (or decades).

With elections in Greece scheduled for April, investors are worried that the next government will lack a mandate to continue to implement unpopular reforms. What if the Greek people vote against an ongoing austerity plan that has yet to bear fruit?

Antonis Samaras, the leader of the New Democracy party who is likely to be prime minister after the elections, told Parliament last week, “I want to avoid the jump over the cliff today, to buy time, to restore normality and to go to elections tomorrow. This is why I ask you to vote in favor of the new loan agreement today and to have the ability tomorrow to negotiate and to change the current policy which has been forced on us.”

So what are the odds that Greece and other European countries will leave the Eurozone? According to Paddy Power, the renowned British book maker, the odds are very high for Greece leaving and adopting its own currency. 1/4 odds is a low payout (similar to that of Greek bond holders!). Portugal is next at 8/1 odds, a much more favorable payout.

From a bettor’s standpoint, whether in markets or betting, there just isn’t a jackpot to be found in Europe today.

Here are all of the odds, according to Paddy Power:

“Applies to the first of the Eurozone 17 to withdraw and officially adopt a currency other than the Euro.”

Greece – 1/4
Portugal – 8/1
Ireland – 10/1
Spain, Germany, Italy – 12/1
France – 14/1

OCA News Editor