IRPC '12: Europe HPI faces rising risk of Greece exit from EU - consultant

By Ben DuBose
Online Editor

VIDEO: On-site interview with Dr. Jan Randolph of IHS

MILAN, Italy -- A challenging environment for European refiners and petrochemical producers could be further threatened by an impending exit from a nation such as Greece, a director with global consultancy IHS Global Insight said on Thursday.

Dr. Jan Randolph, director of sovereign risk at IHS, said the likelihood of a “fringe breakaway” of one country - namely, Greece - from the European Union (EU) was 20% within one year and 40% within five years.

Those figures are up sharply from earlier figures of just 5% and 20%, respectively, in November 2011.

“In the worst-case scenario, pressures inside and outside government and country will mount,” said Dr. Randolph, who delivered the keynote address on Thursday at IRPC 2012 in Milan.

“An inability or unwillingness to meet bailout terms severs sovereign sector financing,” he said. It could also be triggered by a failure to agree to a second bailout, imposing more austerity or “hard default” with new currency.

“Greece would essentially weigh up opportunity costs and benefits of staying in or leaving, and in this scenario, it tilts to the latter.”

Several significant European refining players have expressed concern at IRPC over the region’s economy, noting that technological innovations must lead the way for the sector since economic and debt concerns are limiting traditional demand.

Dr. Randolph said a larger breakup of the EU was unlikely to occur, giving it only a 2% chance within the year and 3% within five years.

On the whole, he described the future of the current union as a “coin flip”. Over the next five years, Dr. Randolph gives the EU a 52% chance of staying intact, with Greece the largest risk.

“Southern Europe is clearly in recession,” he said. “The question is how deep it will go.”

For more IRPC 2012 coverage, visit the HPInformer blog or the event website.

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