The Grexit Dilemma: What Would Happen if Greece Leaves the Euro Zone?

Europe cannot agree on more bailouts for Greece, and since electing a new leftist government, Greece is failing to offer a plan on how it will repay its heavy debt, reports an article in Spiegel Online. This opens the possibility of the nation’s exit from the European Union: “Greece's creditors … will not just have to reach agreement with Athens on interest rates and payback periods, but also on issues such as the minimum wage and increases to retirement benefits.” European officials expect Greece to reduce spending and privatize some public assets. Some Greeks have stopped paying taxes altogether and investors are wary about the market. By quitting the euro, Greeks could expect higher interest rates, widespread bankruptcies, bank and company failures. Exports would be less expensive, but the government would have to impose controls to prevent a run on banks; food and medications could be in short supply. Bondholders of Greek debt would lose, but Europe does not expect the difficulties to spread. Spiegel Online suggests that Greece could have “trouble raising money for years to come.” – YaleGlobal