Wednesday, January 21, 2015
The prospects for Greek departure from the euro-area.
Since the political crisis of 2012, when the term 'Grexit' -- Greek exit from the euro -- was coined, the risk of such an eventuality has increased. The Greek economy would suffer enormous damage, while the euro-area would incur significant political and economic blows, including a contraction estimated at 1.5% of euro-area GDP, at the very least -- greater than the current contribution of the Greek economy. For Greece, a 20% contraction and a 50% erosion of average per capita income in euro terms are forecast. The new currency would be unlikely to promote exports, because of the high cost of imported machinery and intermediate goods, and the tourism industry would also be exposed to high inputs.