Barclays Wealth believes there is a 40% risk
that politicians will continue to ‘muddle through poorly’ in their
approach to the eurozone crisis – despite the Greek rescue package
recently agreed – according to a senior figure at the financial

Oliver Gregson, head of product development at
the wealth management arm of Barclays, told Private Banker
that politicians still had not got to the root
of the crisis.

Gregson said: “At the moment we are treating
the symptoms, not the cause. The cause is low growth and low
productivity in a number of these economies.”

He added that Barclays Wealth sees only a 5%
chance of a speedy resolution to the crisis and assigns a 15%
chance to the worst outcome, a disorderly default.

Willem Sels, UK head of investment strategy at
HSBC Private Bank, said the success of the austerity programme
depends on the ability of Greece – and the rest of the eurozone –
to lift economic growth and competitiveness, as well as the fragile
social fabric in Greece.

“The violent demonstrations in Athens in past
weeks show that there is strong opposition to the programme
already, and markets hence worry whether the commitment to
austerity will hold for the many years that are needed to bring the
debt back down to more sustainable levels.

“If not, further haircuts for private
bondholders are possible in the future, and we believe markets will
thus continue to price in a high probability of default.”

A deal to provide further emergency funding to
Greece is in the process of being ratified by various European

Under the terms of the package, Greece will
receive €130bn ($175bn) of loans in return for implementing cuts to
government spending worth 1.5% of GDP.

Private sector lenders will have to write off
53.5% of the money Greece owes them.