So what will really happen if Greece leaves Eurozone?

I've seen lots of articles and news saying that if Greece leaves Eurozone it will affect all EU, but none of them explained how. How bankrupcy or leaving Eurozone of 11 mln country that has poor industry and lives of tourists can affect rest of us?
The way I see it is the biggest problems will have Greece, as they will have to print their own money, plus noone will borrow them money anomore.
It may also encourage South European countries to leave Eurozone as well
plus EU will loose reputation on international arena if they allow this to happen.
Plus export-improt statistics may change a bit

But what will be financial consequence for rest of EU? what will be financial consequence of it for John from London who works as driver, or Hans from Bonn, Adele from Paris, Tomek from Warsaw? will it affect normal people's life?
will it be as bad as 2008-2009?

well, if greece leaves the eurozone then they will also very likely declare bankruptcy. Once that happens, a domino effect would start that will cripple through the entire system. Spanish banks, still being largely exposed to greek debt would have to declare bankruptcy, then in turn other banks that lent to those banks will crash and so on until most of europe's banks will have to declare bankruptcy, cause they won't get any money anymore from their already "dead" banking partners.
At least that's one theory I read about.
Will it be as bad as the financial crisis? No one knows, but some articles suggest that the financial crisis in 2008 would be a mild sneeze, compared to what could happen when greece goes bankrupt (which would then be a full blown flu).

Anyways, it depends what the EU and central banks do and are able to do once such a scenario happens. I heard that the central banks are planning to inject the system with a trillion dollars, at the day greece leaves the EU. Hopefully that is enough to prevent a crash.

Anyways, these are all just theories and maybe the effect won't be as wild as some articles seem to suggest.

I think Greece leave Eurozone or continue stay no difference. Each of two option will effect negatively Euro value.
Even staying Eurozone more negatively effect Euro. I am considering that total EU devaluation against USD will be multiplier whole foreign debt of Greece.

i think that a risk assesment was carried out somtime ago,within the exposure of all relevent individual countries banks,from that assesment the germans decided that it could remain strong on the greeks terms.if that risk assesment would have shown that the euro banking system could not withstand greece going bang theywould have reduced the terms more in favour to what greece wanted and requires,i believe it dosnt matter wether they fold or hold.the germans would not be so stern otherwise,spain and italy is another story,but watch how they negotiate terms with these larger countries,they cant manage ther exposure,so softly softly

http://www.scribd.com/fullscreen/819...3qltzkyklsibr9

it's somewhat academic and pretty long, but accessable and very thorough.

i would like to say what i learned from it, but it simply woudl be beyond the scope of this forum.

but, feel free to read it, and see things very possibly more clearly, even if you don't agree with the conclusions, the data and comprehensive considerations given are...impressive, to say the least.

X

The Greeks have formed the new Government.
Q. Does this mean that now the so-called "Greek question" is closed?
A. No, it doesn't.
Q. Why?
A. Because now the European Union and especially Germany will have to listen Greeks proposals about time-out of cutting in social programs. These measures are prescribed in conditions of the financial help to this country.

Can you imagine the German reaction for this news?

Also one good view at this situation on the paxforex blog
Greece asks about time out

Reactions of the germans will be that they won't accept that. Merkel's political power in germany falls or stands in how she reacts to that and I promise you most germans don't wanna throw more money into the throat of another country, especially if it doesn't do everything possible to pay it back one day (which will anyways never happen).
This would be the perfect excuse for her to stop all help immediately and cut the greek out of the euro-zone. Question is what will happen then? A denomination of debt in drachme, which is essentially equal to a state bankruptcy and then off we go to a devil's circle (maybe). Gonna be an exciting half year.

Personally, I hope Greece leaves the EU and goes back to being a 2nd world country. I spent a bit of time there in the early 80's and then in the late 80's when I lived in Turkey. It was a great place to visit...nice and cheap. It's gotten so expensive since joining the EU that it borders on ridiculous because it's still a 2nd world infrastructure yet with 1st world prices.

Germany should begin to listen other opinions! Now it looks like dictatorship methods. This crisis is not a fault of Greece people but their financial institutions which very closely related with other "bosses" of Europe.

Why Spain will receive about 100 bl. WITHOUT any condition?
Where is the so-called "EU's equality of all countries"?

One thing is clear - Germany must begin to be more flexible

Of course they dictate to their debtors what they have to do. Ever took out a loan from a bank and couldn't repay it anymore? Guess what the creditors will do. They will either take your house, get your paycheck from the company you work for.
Once you owe money you are the one who has to listen and the one talking is the creditor. This is simply a creditor-debitor relationship.
Why the fault of their financial institutions? It's the government that has the debt, not the financial institutions. They created unsustainable social security programs. So you could maybe blame the politicians, but in this case you definitely can't blame the financial institutions (well, except goldman sachs for hiding some debt when greece applied for entrance in the EU)
As far as I know spain is doing everything possible to reduce their debt.
maybe, let's see what happens.

Acually, if GERMANY wants to have any chance of getting paid, they should be flexible. If greece actually wants to strengthen their position in the world, financially and economically speaking, they should leave the EU.

due to the fact that the euro currency is essentially, a "gold standard" in regards to central banks of soverigen nations not having the ability to control the money supply - IE: not being able to devalue their currency, it maintains an economic imbalance that in effect "punishes" the less fiscially robust nations and benefits the more fiscially robust nations. And not in the obvious sense, but in a magnified, disproportional sense.

Case in point - the whole point of having a free floating market determined valuation of a currency is to maintain "balance" (in theory anyway). Normally when a nation is financially unbalanced, such as greece is where it has too high a debt to GDP ratio, and is experiencing a full blown financial depression... their currency would devalue and various investors pull money out of there markets, don't buy their bonds, etc.

This would cause a normal market determined devaluation of their currency. And, now with a currency of lower value, the nation in question (greece in my little example here) now suddenly becomes much more competitive in the global marketplace. They can become net exporters, due to their currency being quite cheap when compared to other nations currencies, and they also have the additional benefit of being able to pay off their debts with "cheaper money"...

in effect, if greece had it's own currency, the market would have devalued it, and as I type this, greek exports would be more competitive, this would fuel a "mini boom" that would quickly enable the government to tax this economic activity, and therefore pay off their debts at a cheaper price (due to devalued currency) and via self generated economic activity... ie: economic GROWTH.

but, greece (and others) cannot print their own currency, nor can they devalue their own currency. In fact, much of the strength of the euro can be accredited to the fiscal robustness and dominance that is germany.

Therefore, as long as greece (and others) are tied to the euro... they will be fighting an uphill battle because they will simply not be able to compete with the german financial prowess... and it sucks, because that's what is why greece can't win. they would need to be on track suddenly to surpass germany in their industrial and financial output, but they will have the overhanging debts that will greatly limit their ability to focus on "growth" (and lots of other reasons too...)

it's a catch 22 of sorts.

Howeever, if greece and others left the euro currency, they would in fact be the great benfactors of this. Germany, the UK, and other major soverigen debt holders would be the losers.

There have been over 60+ currency union breakups in the last 100 years, and even some of the most recent and "catastrophic" like Argentina circa 1999 - 2002, (which wasn't a breakup, but a situation of uncontrollable currency devaluation and loss of economic strength) where they saw tremendous fiscal and economic problems. here is a quote from wikipedia:

In a 2001 interview, journalist Peter Katel identified three very serious crises that converged at "the worst possible time" in his explanation for why the Argentinian economy unraveled in the manner that it did, at the time that it did:

The Argentine peso was bound to the US dollar at the start of the 1990s by the Economy Minister at the time, Domingo Cavallo.
The large amounts of borrowing by former Argentine president, Carlos Menem.
An increase in debt due to the considerable shrinkage in the size of tax revenue that the government was receiving.[3]

By late December, 2001, riots had reached the capital, Buenos Aires.

Sound familiar? Well, it took less than 3 quarters for the "financial fallout" to fade away, and within less than 18 months, their GDP was on track to exceed what it had been before the crisis ever started. In the process, their economy boomed,
unemployement dropped like a rock, almost on a week-by-week basis... and it was basically all over within 24 months (and, it provided massive investment opportunities for those who were willing to bet on an Argentine recovery shortly after their currency imploded)

Taking argentina as a case study example, they only way out is to purge the books. and the only way to do that is to have a currency that the marketplace can devalue, in order to get past the mess and build economic growth as a function of opportunity being created, rather than growth as a function of "stimulus and bail outs" which does not create opportunity, and in this case due to the size of the debts, only delays the inevitable.

the euro currency is a failed experiment. There have been nobel prize winning studies on what factors make for a good currency union... in short, the euro zone fails on every single count. (even if the prize winners themselves believed it would... they seem to have greatly over extended the interpreation of "the criteria for a good currency union")

and the longer it drags on, the longer the euro zone as a whole will suffer econimically, politically, and socially.

Bottom line, although the uniqueness of this situation has more to do with the "domino" effect of sovereign bankruptcies and loss of economic stability... the "root" of the problem is excessive debt that needs to be either paid down, or purged. And just like an entity filing bankruptcy, the debt can sometimes reach a level that is unrealistic or even impossible to pay down, due to the fiscal hardship that would be felt in an attempt to do so.

You can take your medicine in one big dose and get it over with in a short time (say, between 1-3 years) or you can have it drag on as you continually try to pay of that debt, which could slow or halt growth for many more years.... possibly beyond a decade. didn't it take about 80 years for the weimar republic to finish payments? Not that germany "suffered" under the burden for so long...but the burden was a direct catalyst to the formation and subsequent rise to power of the nazi party... and the "system" did last as a burden to germany for the better part of 14 years... allowing radical idologies to rise up and exploit the economic suffering of the german people.


THIS IS A SUPER OVER SIMPLIFIED WRITE UP. but, i believe it will provide the lay-person who reads this thread some understanding of whats going on here...

Personally, I see some nations leaving the euro as not only inevitable, but actually beneficial, to them, as well as the larger euro zone economic strength. The ones who suffer the most are those who hold the debts...but they will be crippled either way. Either by slow or negative economic growth as their former "customers" and users of their exports are not longer financially able to "buy german goods".... or by losing the right to collect on the debts that a select group of those nations currently owe.
In the long run, I also believe it would be better for germany if the weaker euro zone nations were able to get back on their feet faster...even if the short term plunges germany into a recession.... as they will likely end up in a recession either way, regardless of what comes to pass.

The debt must be purged, one way or another. And it's up to all parties involved to not overextend either credit or debt in the future, as all parties involved are to blame for this situation. Who's more foolish or more to blame... the credit junky who borrows past their means? or the creditor who profited from the junky and continued to loan that junky large amounts of capital without taking the necessary measures to determine the true credit worthyness of the borrower (credit junky)?

X

I don't think that Greece will leave Eurozone because many countries are ready t o give bailout package. But if unfortunately it happens then we will have to ready for another business crisis start from Europe like 2008 in the past.

Here is today's news which practically reflects my point of view: "Egan Jones, the small US-based rating agency, downgraded Germany from AA- to A+ with negative outlook. The reaction in the Euro was muted.

"German chancellor Angela Merkel continues to create tension with EU member states by resisting calls for EU bonds (shared liabs.)," says the official report. "Money printing calls and for her pushing for fiscal controls and the seniority of bailout funding.The fallout from a likely Greek exit needs to be monitored. We are cutting to " A+ ."
European crisis

looks like any forex player can establish rating agency and earn on them own news :/

Yeah very true! Therefore I rate them A+

I think Greece doesn't leave Eurozone. It would be very painful for Greece to do so.

so how about Cyprus? do you think their situation can affect rest of the countries of EU?

there is a difference. once greece leave erurozone, the others like italy, german will also leave euro. it means goodbye for euro

but if greece have stayed. euro value will decrease continually as greece financial debt growth