Greece Faces ‘Miserable’ Future Outside Eurozone

Athens Graffiti
A woman walks past a graffiti that reads "Cut the debt, IMF go home" in Athens January 24, 2015. Alkis Konstantinidis/REUTERS

Greece will most likely leave the European Union, leaving the country without essentials such as oil and medical supplies and compounding the misery caused by austerity, an adviser to the European Commission has said.

According to Andrew Lilico, the chairman of European Economics, ongoing negotiations between the new Greek government and the Troika (the European Commission, European Central Bank and the International Monetary Fund) will lead to an eventual Greek exit from the euro, and then the European Union.

However, such an exit would likely serve as a wake-up call to other Eurozone countries, Lilico said. “Things will be very miserable in Greece when they leave, so other countries will see this and decide they don’t want to go through the same.”

The only scenario in which the Eurozone would break down following a Greek exit would be if Greece was economically successful after leaving, he added. “The more plausible threat is if they left the euro and things went well for them, then other countries such as Spain, Portugal, Ireland, would want the same.”

However, that is unlikely to be the case, Lilico added, as if they left “the Greeks will run out of oil, medical supplies, all sorts of things. Other countries would then swing back to the mainstream parties. There would be a bit of a crisis for a few days, it would have a number of political consequences.”

British prime minister David Cameron held a meeting of the COBRA emergency committee in Downing Street today to discuss contingency plans for a Greek exit as the crisis escalated. Bookies Paddy Power now have odds of a ‘Grexit’ by 2018 at 5/4, while the Greek debt crisis has seen shares sliding across Europe.

The Greek finance minister, Yanis Varoufakis, was sticking to his guns today, pushing for a bridge loan to tide the country over until a restructured debt settlement can be reached.

But European Commission President Jean-Claude Juncker said Greeks should not expect the Eurozone to accept the latest terms proposed by the Greek government.

With both sides hardening their stance, they are playing “a game of political chicken”, according to Professor John Ryan, an expert on the Eurozone crisis from the University of Cambridge.

But he was more sceptical about the possibility of a Grexit: “There are no legal mechanisms to get rid of a member of the Eurozone. This month is crucial to finding out where this leads. Are we going to get debt restructuring? Germany and other Eurozone countries say no. Syriza have been elected on the basis of getting that debt relief. We have a situation where both sides are negotiating and are not coming to any middle ground. The only way towards Greece leaving the Euro is if Greece default on their debts.

If Greece did leave he added, others may follow. “The markets won’t accept only Greece leaving. It will create a lot more difficulties than the European Central bank and the German finance ministry have forecast.”

“There is a possibility but not a high possibility of a Eurozone breakup. If Greece leaves the euro we could see one or two other countries decoupling.”