There's an amusing pair of headlines back-to-back today on what a Greek exit from the Eurozone might mean. One view is catastrophic, the others is along the lines of no problem. Let's start with the catastrophe.Economic historian Barry Eichengreen says Greek Euro Exit Would be ‘Lehman Brothers Squared.
FRANKFURT, Germany (AP) — Talk of Greece crashing out of the euro is back. And the question of whether Europe can handle another crisis in Greece is heightening financial uncertainty for the currency union just as it is struggling to grow and create jobs. Some analysts and politicians say Greece 2.0 wouldn't be as rough on the eurozone as the original Greek crisis and default in 2010-2012.
Brussels (AFP) - Fears of a Greek euro exit have returned with a bang after Athens called early elections on Monday, but steps taken after the financial crisis should stop the rest of the currency zone imploding, analysts say.
According to IIF director Charles Dallara in a Bloomberg interview, "ECB will be insolvent if Greece were to exit the euro. Europe would have to first and foremost recapitalize its central bank."
Excuse me for asking but how would they attempt to do that? Print Euros?
Please consider Dallara Says Greek Euro Exit May Exceed 1 Trillion Euros
A small dose of reality has set in for a group of European central bankers: Euro Officials Begin to Weigh Greek Exit as Euro Weakens.
Greece’s possible exit from the euro moved to the center of Europe’s financial-crisis debate, rattling markets as authorities in Athens struggled to form a government.
Inquiring minds will note that the German tour operator Tui is taking measures to protect itself from a Greek exit from the Euro and subsequent currency meltdown.Please consider Tui prepares Greek hoteliers for possible euro exitGerman tour operator Tui has asked hotels in Greece to sign new contracts spelling out how the company will pay its bills if Greece leaves the eurozone and starts using a new currency.
As the days progress, the strategy of George Papandreou has become increasingly clear. He does not like the terms forced on him by Eurozone bureaucrats especially French president Nicolas Sarkozy and German Chancellor Angela Merkel.Not only is he fed up with Eurocrats, he is fed up with Greek protests as well as pressure from political opposition.
A key question on trader's minds is who will win the June 17th Greece election and whether it results in a Greek exit of the eurozone.
Deutsche Bank gives it assessment in a report called Probability weighting EUR views on Greece
In a surprise move the ECB cut rates by 25 basis points. They had plenty of reasons to do so such as German PMI contraction, Eurozone contraction, postponement of the EFSF bond sale, and the surprise referendum in Greece.