The chances of Greece leaving the euro in the next 12-18 months have risen to about 90%, US bank Citi said in a report on Thursday, saying Athens was most likely to quit the single currency within the next two to three quarters.
The report, dated July 25 but distributed in an email on Thursday, said the bank expected Italy and Spain to take a formal bailout from the European Union and IMF on top of the banking aid for which Madrid has already asked.
Citi economists had previously put the chances of a Greek exit at 50 to 75%.
"We remain gloomy on the euro crisis," Citi economists said.
"Over the next few years, the euro area end-game is likely to be a mix of EMU exit (Greece), a significant amount of sovereign debt and bank debt restructuring (Portugal, Ireland and, eventually, perhaps Italy, Spain and Cyprus) with only limited fiscal burden-sharing."
Citi said it expected Greece's exit from the euro coupled with economic weakness in the euro zone's periphery to trigger further sovereign downgrades in the single-currency bloc in the next two to three quarters.
It saw at least a one-notch downgrade by at least one major agency for Austria, Belgium, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal and Spain.
Outside the euro area, Citi expects both the US and Japan to have their ratings cut by one-notch over the next two to three years. Also Britain may lose its triple-A rating over the same period due to economic weakness and fiscal slippage.