A Greece euro exit could make Lehman's collapse 'look like a tea party'
By Richard Quest, CNN
updated 12:35 PM EDT, Mon May 21, 2012
London (CNN) -- The wheels are coming off the wagon. The fat lady is about to sing. The proverbial is about to hit the fan. It doesn't matter which saying you use, the facts are inescapable. Greece's membership of the eurozone is untenable under the current conditions and everyone knows it. Some like Hungary's finance minister say openly Greece will leave the euro. The only question is what catalyst will force it out and when. The nearest deadline to hand is the country's June 17th elections, when the Greek voters will decide whether to support parties who will adhere to the bailout agreements or those who want to tear them up.
Private economists have gone into overdrive trying to work out what will happen. On Friday, Bank of America Merrill Lynch published "what if Greece Exits the Euro" describing the risk as "rising." Citigroup uses the word "probable" for an exit in certain circumstances while Barclays published "dealing with a potential Greek exit" and says "over the longer horizon the likelihood increases."
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What is worrying is that if Greece (only 3% of EU economy) goes is who will be next? Hungarian finance minister Gyorgy Matolcsy, who I also spoke to Friday, thinks Greece won't be the only country to exit.
Obviously now everyone has Spain in their sights. And there is where the real problem lies. Spain is too big to fully bail out a la Greece and definitely too big too fail. If Spain gets into too much trouble "Project Euro" is likely over. From all my private talks with European officials it has become clear -- Spain is the line in the sand. Greece may be too far gone and be allowed to fall, but Spain will be defended till the bitter end. So I fully expect European leaders to give Spain something to take the boot off the throat of austerity in the coming weeks. Probably the same for Portugal.
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could speculate for hours about which solution will be found, what formula they will adopt to keep the whole thing moving -- and frankly, it would be useless. This crisis is now moving too fast and has taken on a life of its own. The firewall is starting to smolder. The austerity plans are starting to fray. The European Central Bank is cutting loose several Greek banks it does not consider solvent. The eurozone is all but back in recession. There are some uncontrollable aspects (the Greek voters for instance) which make forecasting the future direction just about impossible.
More: http://www.cnn.com/2012/05/21/business/quest-euro-exit/index.html?hpt=hp_t2
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