There is so much talk these days about a possible euro exit
of Greece, especially under a left, anti-bailout government. I found an
very interesting article about the consequences for Greece and the other
Euro countries. The author, an Italian, asked several market experts on
the impacts that “such a shock” would have on financial markets and the
real economy. The article begins with the crucial question: Can an EU
member leave the European Union and the Euro zone? Leave, EU “Yes”, but
leave EZ is questionable, as it has not been foreseen in the Treaty.
“Article 50 of the Treaty on European Union stipulates
that a member country, without any motivation, can freely leave the
European Union. And consequently, according to the prevailing view, even
the euro. But the same article, nor other of the Treaty, does not refer
to what would be the mode of exit and return to the domestic currency.
In this climate of chaos in financial markets and regulatory
uncertainty, Greece seems more outside than inside the euro.”
While some experts predict ” problems”, others “see” the end of Greek
world with rising inflation, interest rates and social unrests.
According to Vincent Longo of Ig Markets “the country
would find itself starting from scratch, with an economy entirely to
rebuild without aid or funds from outside. Moreover, the country could
be isolated from trade with the rest of the area. Do not overlook that
would be seriously threatened the credibility of the country and this
would complicate the ability of Athens to attract capital from abroad.
On the other hand, Greece could enhance the ability to independently
decide its monetary policy, which at this time of crisis could be guided
towards a devaluation of local currency, the drachma, to restart the
economy. In this scenario we expect that the recovery that the country
could have would be much slower and more painful than the rescue
provided by the EU”.
As for the consequences to the euro zone itself, experts seem to agree, that if other euro-weak members follow Greece:
“Euro would emerge stronger because it would get rid of
one of the countries most vulnerable and problematic that both cost the
European community, on the other hand, would increase tremendously the
pressure on other weak countries, Spain, Portugal and Italy “, agrees
Vedana.
PS Greece, Spain, Portugal and Italy could establish their own OEZ (Off-Euro-Zone) common market…
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