Greece is in the midst of a negative compounding story and the only relief in sight is a short to medium term break from the Eurozone within about six months’ time, says Steen Jakobsen, Chief Economist Saxo Bank.

“Although I want Greece to have all the best things in the world I think ultimately it will need to do something which is outside the box,” says Steen.

He believes an exit from the Eurozone within six months is a very likely scenario considering Europe’s desire to try to keep Greece alive for some time yet, particularly ahead of the upcoming German election. Until then Steen sees Europe going through some rough patches before a recovery begins in 2013.

A worst place is ahead for Europe
“The first quarter of next year will be the worst quarter of the debt crisis in terms of growth and the amount of headwind to austerity and the lack of ability to move to a mandate for change,” says Steen. “We will see recovery inside the next four quarters in Europe but we need to go to a worse place first.”

Disintegration and desperation
The main problem for Greece is that none of the promised austerity measures have been implemented. And with no one willing to give up their entitlements this has created a negative compounding story where everything disintegrates and gets worse month by month as seen by the recent social tensions.

Meanwhile, the rest of Europe is so desperate for Greece to continue as if nothing has happened and so it is very likely that within the week Greece will be paid its next tranche of financial aid in order to stay afloat, says Steen.

See more of Steen's commentary on TradingFloor.com: http://www.tradingfloor.com/traders/steen-jakobsen