Little Time? At the end of the text there’s a summary.
If you believe the public opinion in Germany, would be Greece’s euro exit a kind of liberation. “Now Angela Merkel is planning with the Grexit”, writes the newspaper “Bild” this Friday. And guest commentator Ernst Elitz exults: “The Grexit is no longer a dirty word, he is the clear answer to the policy of insolence in Athens..” Something like that sees apparently the majority of the population. According to ZDF “Political Barometer” argued last only 41 percent of respondents to remain the country’s crisis in the monetary union. Against 51 per cent in favor of the so-called Grexit. Great impact of such a move not worry, most respondents. Only 28 percent expect a strong or very strong economic damage for Germany.
This relaxed attitude is in stark contrast to what is currently happening on the financial markets. In the whole of Europe, and even in the US, investors seem particularly interested a: Greece reaches agreement with its creditors, or should it withdraw from the euro zone?
The German DAX index 
about moving for days in the turbulent zigzagging – Tendency decreased. Come messages like the above short-term withdrawal of the International Monetary Fund (IMF) of the Greece talks, rushes the share barometer within minutes rapidly downward. Also on Friday slipped the Dax temporarily deep into negative territory, after it became known that the Euro countries advise at least over a Greek default
Similarly, also behaves the exchange rate of the euro . Again, there are sharp fluctuations. And here it was last in the face of bad news usually downwards.
Is the fate of Greece so not as matter, as suggested some German politicians and economists for months?
In fact, the consequences of a Greek sovereign default and a potentially following withdrawal from the euro zone are difficult to predict. How bad would it depends among other things on how regulated would hammer out the transition to a new currency the country. But there are signs out that the Grexit in no case a breeze would – neither for Greece itself, nor for the rest of the euro zone.
The consequences for Greece:
- The new currency (let’s call them drachma) would compared to other currencies massively in value lose . This would mean that all imports, which would be paid in drachmas, considerably more expensive. For the Greek citizens that would be a Inflation shock . Finally, the country imports about half of its food and about four-fifths of its energy. Even drugs would abruptly expensive.
- Conversely, would the Greek exports cheaper, the Greek economy so competitive – a fact that Grexit advocates as the head of the Munich-based Ifo Institute, Hans-Werner Sinn, repeatedly stress. The only problem is that Greece has no really functioning export industry. Apart from a few food products is not much. Would help the devaluation of the drachma, however, the important tourism industry. holidays in Greece for all the other Europeans would be significantly cheaper.
- Greece would have to be prepared for a wave of bankruptcies . Not only the government, many companies have gone into debt in euros. In the case of the burden of this debt Grexits would greatly complicate, because the company would have to pay out of their comparatively cheap yes drachmas. Because the Greek banks fell by the state bankruptcy in trouble, the lending would considerably restricted to businesses.
- economic performance of Greece would likely plummet further. How long and how hard that can be not serious predictions. Even a comparatively small decline but could have catastrophic consequences for many people. Finally, economic output has already fallen by around 27 percent since 2008 – with disastrous consequences for jobs and social services
The consequences for the euro area:.
- At least in the short term is likely a Greek default for turbulence provide on the financial markets , which show the nervous reactions of the past days. In addition to the stock market, the euro exchange rate should break.
- What is the would be contagion to other crisis countries of the euro zone, is open. There are many indications that they would be lower today than it was two or three years ago. Financial investors would find it difficult to speculate on the insolvencies of other countries such as Spain or Italy. For this already makes the European Central Bank (ECB), each month buys bonds of euro countries in volume of around 50 billion euros in the course of fighting deflation. That takes a lot of pressure from the crisis states. In this respect, the timing of a Grexit would currently as low as never before.
- cheap would a Greek euro exit not yet. Even in the event of a sovereign default in the euro states would have a good part of the allocated to Greece emergency loans write off – overall it is by 327 billion euros. For Germany are around 42 billion euros at stake. In the event of a euro exit addition, the ECB would have suffered billions in losses that would arise from liabilities in the European payment system TARGET2. This is about 100 billion euros, of which the Bundesbank would have to bear a share.
- European banks would have in the event of Grexits Although fear not so serious effects more like about even in 2011. They have significantly reduced their exposure to Greece. According to the Bank for International Settlements (BIS) in Basel had the European banks the end of 2014 but still demands of nearly $ 33 billion to Greek borrowers, approximately $ 13 billion of which was attributable solely to German banks. Much of this money would be in the event of bankruptcy and Grexit well off also.
- What are the economic consequences for the euro area would have, if a country suddenly fell out from among them and impoverished, is difficult to estimate. The political consequences but would be immense in any case. The euro zone would not be a covenant for eternity more, the way to the exit would be paved. And once a country latter will become economic difficulties, would start the speculation, when the next candidate says goodbye.
summary The majority of Germans is for withdrawal of Greece from the euro zone – also because politicians and economists say that the consequences would be manageable. In truth can be the consequences of so-called Grexits difficult to predict – but at least for Greece itself, the location would probably be turned worse instead of better
Many last chances – quotations for Greek crisis
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