Written by Thomas Westgarth
So the Greek public have spoken, they have voted to refuse the offer made by EU to bailout a country which has made a bigger hash of their finances than any other developed nation, debt to GDP levels of 190% don’t look like going away quickly. And whilst a Grexit from the Euro will mean that we can all have cheap holidays there, political and economic chaos will ensue within the country.
Here are just some of the disasters that will be in store if Greece leave the Euro:
High unemployment and high inflation
Hardly the ideal start to their independence from the Euro. A lack of confidence in the Greek markets will see companies pull out of the Greece, hence losing job in the process. A lack of bank lending or quantitative easing( which is basically printing money) will cause inflation. This will result in further discontent amongst the Greek markets
Money will dry up in Greece
If the European Central Bank refuse to loan to the Greek government, the Greek banks will have to carry the burden of the debt. In this scenario, Greek banks may run out of money and savers money will disappear. No bank in their right mind will lend money to a country which never pays off its debt, unless they charge high interest rates, which is one of the reasons Greece got into this mess into the first place
The PM will probably have to resign
Alexis Tsipras, the hero of the hour for Greece, will soon be seen as a villain. With no money circulating Greece there will be social unrest and calls for Alexis Tsipras to step down. This would create mass uncertainty across Europe as to what the next step for the Greek government would be.
A good outcome from today’s vote was a win for democracy, however even though the citizens of Greece will get what they wanted the outcome will not be in a pretty package.