2012.05.24 10:03:51 Citigroup Economists Say Greece To Exit Euro Zone On Jan. 1 2013

LONDON -(Dow Jones)- Greece will leave the euro zone on Jan. 1 2013 and its new currency will immediately fall by 60% against the euro, unleashing a sizeable and unavoidable wave of contagion across Europe, Citigroup said late Wednesday. In a note to clients, the world's second-largest currency trading bank said the consequences of a Greek exit--or "Grexit"--would accelerate strains in the European banking system and probably force the European Central Bank to restart its long-term refinancing operations and halve its interest rates to 0.5%. "We expect that Grexit will be followed by a series of policy responses aiming to prevent a domino-style collapse of the banking system and escalating economic disruption," Citigroup economists said in the note. Citigroup said the probability of Greece leaving was now between 50-75% and added that a Greek exit would become its base case unless next month's elections stabilised the situation. -By Eva Szalay, Dow Jones Newswires, 44 20 7842 9305; eva.szalay@dowjones.com (END) Dow Jones Newswires May 24, 2012 04:03 ET (08:03 GMT)