What would ‘Grexit’ to Greek and European? – El Nuevo Herald

What would 'Grexit' to Greek and European? – El Nuevo Herald

So what the cost of Greek exit from the euro would be?

While European lawmakers struggle to reach an agreement that would separate the country from bankruptcy, experts are making rough estimates of potential cost its failure.

Neither side wants Greece leaving the euro. It is the conditions of their stay: Athens is tired of budget cuts that are demanded in exchange for 240,000 million euros in loans. The new Greek government says the six years leading the country into recession shows that those requirements to cut spending are stifling the economy.

The creditors eurozone countries, however, refuse to pay more money without harsh conditions.

Without money, Greece could succumb to their debts during this spring and summer. The suspension of payments, the fear of, could cause confusion Greek banks collapse. And it could force them to issue their own currency to rescue them.

Analysts say Greek exit from the euro, or “Grexit” could be chaotic and complex. Probably involve the closure of banks and ATMs to prevent citizens withdraw your money before it can be changed to a new cheaper currency. Bank accounts and mortgages would go to the new currency. It could be months before the new banknotes enter into circulation, forcing people to use euros for small transactions or utilize payments rather than cash.

Some estimates of the potential damage.

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COSTS FOR GREECE

Commerzbank Economists estimate that the country’s economy, which lost a quarter of its value since the beginning of the crisis, could contract another 10% in the first year after the departure of the single currency.

The new drachma would fall by 50% or more against the euro as the central bank issuing more money to keep operating banks . This would mean that imports such as medicines, cars, and oil and gas would reach astronomical prices.

Besides, Greek companies who owe money to its suppliers in euros would be unable to pay their bills, going into bankruptcy. A firms would survive could ask them to advance in euros abonasen parts or raw materials, restricting production.

The depreciation of the currency “significantly reduce the level of Greek life,” said analysts at Commerzbank.

Domestic and foreign investment limit amid uncertainty about the economic outlook.

In the long term, the scenario is less clear. A weak currency could give local producers an advantage since imports would be less expensive. Traveling to Greece would be much cheaper for citizens of the eurozone and this could increase demand in hotels and restaurants.

However, Greece could lose during a major incentive to reform its economy, burdened by a excessive bureaucracy, regulation and corruption. And his stay in the European Union – and its ability to maintain commercial relations with the bloc –

could be questioned

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COSTS FOR THE EURO

. Many analysts seem to think that the eurozone is now better equipped to face the departure of one of its members. Now has a bailout fund and an offer of the European Central Bank to purchase bonds nations pressured by markets

Some, like Christian Schulz of Berenberg Bank, thinks Greece -. Which represents 2% Eurozone GDP – is too small to drag the entire monetary union with her. “For any EU country Greece I is the most export partner,” he said.

The markets seem to agree. The German DAX index reached its highest last week despite rumors of Greece.

However, the impact is difficult to predict, and the stagnant eurozone growth requires every little hint you can get.

And also suffered some specific costs.

First, Greece may decide that you are unable to repay their bailout loans. The losses would range between taxpayers of the other 18 countries.

At the bottom of eurozone rescue owes 142,000 million euros (162,000 million dollars) to countries in an independent capacity 53,000 million euros and European Central Bank has 20,000 million euros in bonds of Athens. The same would probably 50,000 million euros to the European Central Bank to the Community and other entities through the payment system of the eurozone.

leaders like German Chancellor Angela Merkel probably not want to explain to their voters how they lost both Greece

But this would not necessarily undermine the finances of donor countries, Schulz said.. “Politically it would be extremely inconvenient but financially would not be a big difference”

The cost in relation to what people think about the euro is more difficult to predict.

The countries with weaker economies would pay more for money, as investors would have to take the risk of a possible exit and devaluation in their property when switching to a new currency.

Losing billions in bailout loans could also assume that wealthier countries such as Germany, decide to not share their money with other members of the bloc in the future.

If Greece is recovered in the years after leaving the single currency, this could lead to other even though it is better not join it .

Although the initial chaos could be terrible enough to dismiss those thoughts.

“If Grexit is as bad as we think it is, there will be very few who want to imitate,” said Schulz.