The trillion dollar question: Will Greece exit the euro?
By Irene Chapple, CNN
May 17, 2012 -- Updated 1352 GMT (2152 HKT)
London (CNN) -- The once-taboo topic of Greece's exit from the common currency is now being openly discussed. Two years of pushing cash into the country have barely kept it afloat and the collapse of political talks this week injected a new urgency into the situation.
The potential for a run on the banks increased with the admission by the country's president Karolos Papoulias that up to €800 million ($900 million), was pulled out of the banks Monday. It is a tiny slice of total deposits but a trend, Papoulias noted, that could create "fear that could develop into panic."
Greece, which is facing its fifth year of recession, will go to a second election June 17 after its May 6 voting left no single party with more than 20% support and negotiations to create a unity government failed. An interim government has now been sworn in.
An unplanned exit from the eurozone could cost up to $1 trillion, according to Doug McWilliams, of the Centre for Economics and Business Research. According to McWilliams, "the end of the euro in its current form is a certainty. A currency with the name euro may survive but even if it does it will be radically transformed."
Negotiations between Greece and its lenders might seem a game of chicken, and analysts remains skeptical the end-game is near. But the odds are increasing -- gaming house Ladbrokes even stopped taking bets on a Greek exit from the eurozone -- despite the legal, financial and political difficulties. CNN explains how it could happen.
Legal hurdles
Greece could be forced to exit the European Union, rather than just the common currency itself, because one comes hand in hand with the other. The European Central Bank has the exclusive right to issue euro notes, for example, so any move by Greece to print its own currency would immediately put it in breach of the treaty. Changing the treaty would take some time, so a more likely maneuver is an agreement between euro nations on when and how they would boot Greece out of the bloc.
More: http://edition.cnn.com/2012/05/17/business/greece-euro-exit/index.html
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