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By Bloomberg View

Wall Street is shortening the odds on Greece spinning out of the euro area ahead of Sunday’s snap-referendum.

Mohamed El-Erian is at the high end. The former chief executive officer of Pacific Investment Management Co. sees the chance of Greece leaving the euro at 85 percent in the next few weeks. Morgan Stanley increased the probability of departure by the end of 2016 to 60 percent from 45 percent.

Prime Minister Alexis Tsipras is calling on his cash- strapped nation to use the July 5 vote to reject the measures demanded by the country’s creditors in return for aid. Opinion polls show a majority of the Greek population supports retaining the single currency. Greece shut its banks Monday and imposed capital controls in an announcement designed to avert the collapse of its financial system.

“The odds favor an eventual deal, but the probability of unintended consequences leading to a Greek euro exit has increased,” said Luigi Speranza, a BNP Paribas SA economist in London, who now puts the risk of so-called Grexit at 20 percent.

El-Erian, now a Bloomberg View contributor, said in an interview that Greece is bound for a “massive economic contraction” which, alongside social unrest, is “going to make continued membership of the euro zone very difficult.”

Royal Bank of Scotland Group Plc on Monday doubled the odds on Greece leaving the euro to 40 percent, the same probability as the Eurasia Group and UBS Group AG. Credit Suisse Group AG said a 33 percent chance of an exit rises to 50 percent if the European Central Bank withdraws its liquidity support for Greek lenders.

Grexit

“We were too benign on the willingness of the Tsipras administration to sign a deal, despite the final plans of the Greek side and the creditors not being substantially different in substance,” said Michael Michaelides, a fixed income strategist at RBS.

At Citigroup Inc., which coined the term Grexit in 2012, economists said the likelihood Greeks would support the austerity in return for international assistance meant “no Grexit this year and a lower risk of Grexit in subsequent years.”

Goldman Sachs Group Inc. chief European economist Huw Pill said although its “base case remains that Greece will retain the euro” the threat of departure is “rising and uncertainty is increasing.”

As for the real oddsmakers, William Hill Plc, said it was no longer taking bets on a Greek exit because the situation is “too volatile.” Odds on Greece exiting had halved from 6-to-1 to 3-to-1. That equates to a 33 percent chance, meaning a successful 1 pound bet wins 3 pounds.