What Happens If Greece Leaves The Euro?
Greece is teetering on the edge of bankruptcy and faces the growing possibility of exiting the eurozone. What would that mean?
A giant symbol of the euro outside the headquarters of the European Central Bank (ECB) in Frankfurt. Photograph: Thomas Lohnes/AFP/Getty Images
9.01am: The Greek prime minister George Papandreou’s pledge to put the bailout package for his country’s beleaguered economy to a referendum has thrown the eurozone into crisis and will dominate today’s G20 meeting in Cannes. Overnight, the question of the bailout deal has morphed into a more fundamental question about Greece’s membership of the eurozone.
Photograph: Maurizio Gambarini/EPA
Angela Merkel (left), the German chancellor, and Nicolas Sarkozy, the French president, have issued an ultimatum to Greece to agree the deal or leave, making it clear that they would favour insulating other vulnerable and larger economies such as Italy over throwing everything at saving Greece. Merkel said last night:
We would rather achieve a stabilisation of the euro with Greece than without Greece, but this goal of stabilising the euro is more important.
Meanwhile, Papandreou has suggested that the referendum question would be about membership of the euro rather than the terms of the bailout, a vote that he is far more likely to be able to win. Polls in Greece have shown that 60% of the population are against the terms of the bailout – which includes new austerity measures – but 70% are against leaving monetary union. The referendum has triggered a dramatic split in his government that is increasing the threat to his position by the hour.
Professor Ken Rogoff, the Harvard economist and former chief economist at the IMF, told BBC Radio 4 today that the Greeks “are going to end up defaulting hugely no matter what”, adding:
The odds that they will be gone from the euro within a few years are very high.
No country has every left the euro before and there are no provisions about how they might go about it.
What happens if Greece is either forced or chooses to leave?
Throughout today, I’m going to gather expert opinion to build up an image of the scenarios under which they might happen and assess the potential fall-out for Europe and the global economy. Can you help?
Leave your comments below the line, email me at polly.curtis@guardian.co.uk or tweet @pollycurtis.
My colleague Graeme Weardon is live-blogging all the breaking news about the eurozone crisis here.
Andrew Sparrow is live-blogging from the G20 meeting in Cannes here.
10.04am: I’ve been speaking with Alan Clarke, an economist at Scotia Capital. I asked him what the impact of Greece leaving the euro would be. He said:
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