Greek In Or Out Of The Euro?

10th April 2015

Will They Stay or Will They Go? KPMG Head of Macroeconomics Discusses the Risk of Greek Exit from the Eurozone.

Yael Selfin, Head of Macroeconomics, KPMG said: "As the last date in Greece's debt saga passes by safely, with the Greek government repaying its dues to the IMF, we should remember this is only one repayment in many payable over the next five months.

"At risk is a largely unintended and unplanned Grexit from the Eurozone (and possibly EU), which could see the Greek economy contract by over 6% in the first year, while it scrambles to re-establish its own currency and gain market trust by, one hopes, pursuing coherent fiscal and monetary policies.

"The direct impact on the rest of the European economies is likely to be much less significant, in particular now that banks and many other businesses have reduced their exposure to the Greek economy. But the political significance may be more important, symbolising the potential limitations of EU politicians to resolve problems in-house.

"Medium term prospects in an event of an unintended Grexit taking place over the coming months, however, are not too gloomy. Weaker Greek currency should make the economy more competitive and boost exports, and much needed foreign earnings. Elsewhere, once it is clear no other country is likely to exit the Eurozone club, the uncertainty should be lifted and investment flows return to some of the so-called 'peripheral' European economies."