In 2012, Ebrahim Rahbari and Willem Buiter CitiGroup’s Chief
Analysts came up with the term “Grexit” a blend of Greece, Euro, and Exit. Following the Financial crisis in Greece
it was acknowledged that they might be leaving the Euro, predicting that more
money lent would hurt the Euro and neighboring counties and the Grexit would be
the only other option than differentiated government bond yields. In 2012, De la Rue a British money printing
company was rumored to have been printing out the fresh drachma, which takes an
estimated six months from time of order placement to printing on paper. These rumors and fear created a nine-month money
withdrawing frenzy. It was estimated
that Greek banks deposits fell by thirteen percent constructing a plan to impose
control on the movement of money anticipating more panic with upcoming
elections.
Convincing the people of Greece to leave the Euro to support
a currency that will potentially collapse was not the only challenge. The economic depression that this would cause
would end with slow economic growth for many, not to mention the hardship the
Greek citizens would face. The Deutsche
Bank stated in 2010 that Europe accounted for twenty-five percent of world trade;
it was the largest trading partner between China
and the United States. Speculation that European stocks would plummet
fifty percent and other nation’s bond yields could widen 100 to 200 basis
points leaving them unable to service their own sovereign debts.
The Euro
has hit a nine-year low, for many counties and regions unemployment, flat growth rate along with
low inflation it seems impossible to reduce the debt
levels that would help shift this trend.
The Eurozone is better assembled than it was in 2010, The Eurozone can
handle the exit without a massive hit because the privet sector only has about
five percent of Greece’s
debt, and the government is better equipped with bail out funds ready for such
events unlike five years ago. However,
this has nothing to do with the unpredictability of the people, investors, and
stability that will directly affect and hurt the Euro and the ECB.
This has become not only a financial
matter, it now is highly political.The
upcoming elections on January 25 in Greece
have sparked some not so inviting tones from France
and Germany. With new prime ministers in Italy and France ready
to reform their nations in ways that have gained total support of Germany’s Angela Merkel, who
has insisted European-imposed austerity on nations who really need the complete
opposite. January will be a hard month
for the Euro to regain at strength, too much is uncertain and unanswered. Many questions will be pending on the candidate Alexis
Tsipras, who may soon be the youngest Greek leader at the tender age of forty with a
left-wing alliance Syriza on his side it seems that they deem to diminish the
austerity measures. This threat is creating disorder among Eurozone members. If Tsipras is elected it is
not certain that Greece
would exit the Euro but it is implied. Could Greece leaving the Euro cause a
ripple effect and open Pandora’s Box to many other counties assuming their role?
