Greece euro exit worse than catastrophic - Toscafund

(Reuters) - A Greek exit from the euro zone would be worse than catastrophic and could provoke greater social unrest, Zimbabwe-style inflation and a military coup, said London-based hedge fund firm Toscafund.

In a stark note to clients, chief economist Savvas Savouri said introducing a new currency instantaneously in the wake of a euro exit would be impossible and the delay would lead to "a run on banks and evacuation of capital that would make what has already been seen as nothing by comparison."

"The word catastrophic would not do it justice enough," said Savouri, who comes from a Greek Cypriot background.

"Those who imagine some post-euro-exit stability would be restored ... quite simply fail to understand the magnitude -- social, economic and political -- of such an eventuality."

Toscafund said it invests solely in equities and does not give details of its positions.

Earlier this week German Chancellor Angela Merkel said the goal was for no country to leave the euro, as negotiations between debt-laden Greece and its creditors continue ahead of a major bond redemption in March.

Savouri said he would expect the euro to remain the currency of choice in Greece even if it left the euro and for the official exchange rate with the euro to be quickly undercut on the black market.

He predicted a range of problems for the country, from hyperinflation, extreme difficulty for the government in raising money on bond markets and an evacuation of people able to leave the country, taking as much wealth as they can with them.

"Inflation in Greece would quite frankly spiral in a way resembling Zimbabwe's experience," said Savouri, who also predicted severe poverty amongst the elderly.

"The social unrest seen up until now in Greece would be nothing compared with what would be seen in the dawn of a new drachma."

"It would not be hyperbole to argue that the denouement of a Greek exit from the euro would be at worst the rise of poisonous political extremists and at best a military coup."

Last year Savouri produced research notes saying that reunification between North and South Korea was "certain" and that South Africa was flawed and set to "blow up" within the next 15 years.