Investors’ fears of Euro zone breakup rise in March

Wednesday, 27 March 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The number of investors who believe a member of the Euro zone will quit the single currency bloc over the next year rose to the highest level this month since last September amid concerns over crisis-stricken Cyprus.

The March poll of around 1,000 investors published by research group Sentix on Monday showed 41.05% expected at least one country to leave the 17-nation bloc within the next 12 months, up sharply from 19.25% in February.

The Euro zone agreed a rescue package for Cyprus on 16 March but it took more than a week of wrangling for the island state to clinch a deal with international lenders to shut down its second-largest bank and inflict heavy losses on uninsured depositors in return for a 10 billion Euro bailout.

Nearly 40% of investors expect Cyprus to leave the Euro zone within the next year, up from 10.9% in February.

“However, these new fears have different characteristics to those we saw last summer,” Sentix said in a statement.

“Investors clearly think a Cypriot exit would relieve them of a burden rather than mark the beginning of a wave of exits.”

Greece, long seen as the most likely candidate to exit the euro, fared much better this month, with only 19.2% seeing such a possibility, the lowest level since the index was introduced in June 2012.

That means investors do not see any risk of contagion from the crisis unfolding in Cyprus, Sentix said, though ironically Cyprus’s woes stem mainly from its banks’ exposure to Greece.

“In a certain sense the Euro zone crisis has even lost some of its explosive power despite flaring up again,” Sentix said.

Around 6% of investors expected Italy to quit, the highest since the index was introduced, but investors became less concerned about a Spanish or Portuguese exit, with Spain even regaining some investor confidence. The survey was conducted between 22 and 23 March.