A Greek withdrawal from the eurozone was a hypothetical scenario, debated mostly in the early to mid 2010s, under which

Greece Greece,, or , romanized: ', officially the Hellenic Republic, is a country in Southeast Europe. It is situated on the southern tip of the Balkans, and is located at the crossroads of Europe, Asia, and Africa. Greece shares land borders ...

would withdraw from the Eurozone to deal with the

Greek government-debt crisis Greece faced a sovereign debt crisis in the aftermath of the financial crisis of 2007–2008. Widely known in the country as The Crisis ( Greek: Η Κρίση), it reached the populace as a series of sudden reforms and austerity measures that ...

of the time. This conjecture was given the nickname "Grexit", a

portmanteau A portmanteau word, or portmanteau (, ) is a blend of wordsEconomist Who Coined ‘Grexit’ Now Says Greece Will Stay in Euro
By Flavia Krause-Jackson. Bloomberg Business, 28 June 2015
By Ralph Atkins. ''

Financial Times The ''Financial Times'' (''FT'') is a British daily newspaper printed in broadsheet and published digitally that focuses on business and economic current affairs. Based in London, England, the paper is owned by a Japanese holding company, Ni ...

'', 23 December 2012 and which has been expressed in

Greek Greek may refer to: Greece Anything of, from, or related to Greece, a country in Southern Europe: *Greeks, an ethnic group. *Greek language, a branch of the Indo-European language family. **Proto-Greek language, the assumed last common ancestor ...

as (from + ( + )). The term "Graccident" (accidental Grexit) was coined for the case that Greece exited the EU and the euro unintentionally. These terms first came into use in 2012 and have been revitalised at each of the

bailout A bailout is the provision of financial help to a corporation or country which otherwise would be on the brink of bankruptcy. A bailout differs from the term ''bail-in'' (coined in 2010) under which the bondholders or depositors of global sys ...

s made available to Greece since then. Proponents of the proposal argued that leaving the

euro The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...

and reintroducing the

drachma The drachma ( el, δραχμή , ; pl. ''drachmae'' or ''drachmas'') was the currency used in Greece during several periods in its history: # An ancient Greek currency unit issued by many Greek city states during a period of ten centuries, fr ...

would dramatically boost exports and tourism, while discouraging expensive imports, which would give the Greek economy the possibility to recover and stand on its own feet. Opponents argued that the proposal would impose excessive hardship on the Greek people, the short-term effects would be a significant consumption and wealth reduction for the Greek population. This had the potential to cause civil unrest in Greece and harm the reputation of the eurozone. Additionally, it could cause Greece to align more with non-EU states.

Detailed events

The term 'Grexit' was coined by the Citigroup economist Ebrahim Rahbari and was introduced by Rahbari and Citigroup's Global Chief Economist Willem H. Buiter on 6 February 2012. On 27 January 2015, two days after an early election of the Greek parliament, Alexis Tsipras, leader of the new Syriza ("Coalition of the Radical Left") party, formed a new government. He appointed

Yanis Varoufakis Ioannis "Yanis" Varoufakis ( el, Ιωάννης Γεωργίου "Γιάνης" Βαρουφάκης, Ioánnis Georgíou "Giánis" Varoufákis, ; born 24 March 1961) is a Greek economist and politician. A former academic, he served as the Gree ...

Minister of Finance A finance minister is an executive or cabinet position in charge of one or more of government finances, economic policy and financial regulation. A finance minister's portfolio has a large variety of names around the world, such as "treasury", " ...

, a particularly important post in view of the government debt crisis. During 2015 and 2016, the chance of a Grexit or even a 'Graccident' (accidental Grexit) in the near future was widely discussed. After the announcement of the bailout referendum on 27 June 2015 speculation rose. That day

BBC News BBC News is an operational business division of the British Broadcasting Corporation (BBC) responsible for the gathering and broadcasting of news and current affairs in the UK and around the world. The department is the world's largest broad ...

reported that "default appears inevitable", though it later removed the online statement. On 29 June 2015 it was announced that Greek banks would remain closed all week, cash withdrawals from banks would be limited to €60 per day, and international money transfers would be limited to urgent pre-approved commercial transfers.

Background

IMF's projection

The

International Monetary Fund The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...

(IMF) admitted that its forecast about Greek economy was too optimistic: in 2010 it described Greece's first bailout programme as a holding operation that gave the eurozone time to build a firewall to protect other vulnerable members, but in 2012 the unemployment rate of Greece became about 25 percent, compared to IMF's projection of about 15 percent.IMF admits mistakes on Greece bailout
BBC News, Business, 5 June 2013 IMF conceded that it underestimated the damage that austerity programmes would do to the Greek economy, adding that, in terms of Greece's debt, IMF should have considered a debt restructuring earlier.Greece:Staff report on request for stand-by arrangement
IMF, Country report No. 10/110 (2010) As can be seen from the Figure A, IMF's forecast in the 2010 standby agreement said that the Southern European country would start to grow in real terms after 2011. But in fact the economy continued to shrink, and Greek real GDP in 2013 was about 76 percent of that in 2008.Breaking Greece
P. Krugman, The Conscience of a Liberal, The New York Times, 25 June 2015OECD, National Accounts of OECD Countries detailed tables 2006-2013, Volume 2014/2

Dynamics

Financial dynamics

In mid-May 2012, the financial crisis in Greece and the impossibility of forming a new government after elections led to strong speculation that Greece would leave the eurozone shortly. This phenomenon had already become known as "'' Grexit''". Economists who favour this approach to solve the Greek debt crisis argue that a default is unavoidable for Greece in the long term, and that a delay in organising an orderly default (by lending Greece more money throughout a few more years) would just wind up hurting EU lenders and neighbouring European countries even more. Fiscal austerity or a euro exit is the alternative to accepting differentiated government bond yields within the Euro Area. If Greece remains in the euro while accepting higher bond yields, reflecting its high government deficit, then high interest rates would dampen demand, raise savings and slow the economy. An improved trade performance and less reliance on foreign capital would be the result. The implementation of Grexit would have to occur "within days or even hours of the decision being made" due to the high volatility that would result. It would have to be timed at one of the

public holidays in Greece According to Greek law every Sunday of the year is a public holiday. In addition, there are six obligatory, official public holidays: New Year's Day, 25 March, Easter Sunday, Easter Monday, 15 August and 25 December. Two more days, 1 May and 28 O ...

International law dynamics

One US economist has argued that the legal grounds upon which the "troika", composed by the

EU Commission The European Commission (EC) is the executive of the European Union (EU). It operates as a cabinet government, with 27 members of the Commission (informally known as "Commissioners") headed by a President. It includes an administrative body o ...

, the

European Central Bank The European Central Bank (ECB) is the prime component of the monetary Eurosystem and the European System of Central Banks (ESCB) as well as one of seven institutions of the European Union. It is one of the world's most important centr ...

and the IMF, has pursued the harsh macroeconomic adjustment plans imposed on Greece are shaky, claiming they infringe upon Greece's

sovereignty Sovereignty is the defining authority within individual consciousness, social construct, or territory. Sovereignty entails hierarchy within the state, as well as external autonomy for states. In any state, sovereignty is assigned to the perso ...

and interfere in the internal affairs of an independent EU nation-state: "the overt infringements on Greek sovereignty we're witnessing today, with EU policy makers now double-checking all national data and carefully 'monitoring' the work of the Greek government sets a dangerous precedent." He argues that a withdrawal from the Eurozone would give the Greek government more room for maneuver to conduct public policies propitious for long-term growth and social equity.

2012 Plan Z

"Plan Z" is the name given to a 2012 plan to enable Greece to withdraw from the eurozone in the event of Greek bank collapse.Peter Spiegel
"Inside Europe's Plan Z"
''Financial Times'', 14 May 2014 It was drawn up in absolute secrecy by small teams totalling approximately two dozen officials at the EU Commission (Brussels), the European Central Bank (Frankfurt) and the IMF (Washington). Those officials were headed by

Jörg Asmussen Jörg Asmussen (born 31 October 1966) is a German economist and banker has been serving as Chief Executive Officer of the German Insurance Association (GDV) since 2020. Asmussen served as a member of the Executive Board of the European Central B ...

(ECB), Thomas Wieser (Euro working group), Poul Thomsen (IMF) and Marco Buti (European Commission). To prevent premature disclosure no single document was created, no emails were exchanged, and no Greek officials were informed. The plan was based on the 2003 introduction of new dinars into Iraq by the Americans and would have required rebuilding the Greek economy and banking system ''

ab initio ''Ab initio'' ( ) is a Latin term meaning "from the beginning" and is derived from the Latin ''ab'' ("from") + ''initio'', ablative singular of ''initium'' ("beginning"). Etymology Circa 1600, from Latin, literally "from the beginning", from ab ...

'', including isolating Greek banks by disconnecting them from the

TARGET2 TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System) is the real-time gross settlement (RTGS) system for the Eurozone, and is available to non-Eurozone countries. It was developed by and is owned by the Eurosystem ...

system, closing ATMs, and imposing capital and currency controls.

Implementation

The prospect of Greece leaving the euro and dealing with a devalued drachma prompted many people to start withdrawing their euros from the country's banks. In the nine months to March 2012, deposits in Greek banks had already fallen 13% to . A victory for anti-bailout lawmakers in the 17 June 2012 election would likely trigger an even bigger bank run, said Dimitris Mardas, associate professor of economics at the

University of Thessaloniki A university () is an institution of higher (or tertiary) education and research which awards academic degrees in several academic disciplines. Universities typically offer both undergraduate and postgraduate programs. In the United States, t ...

. Greek authorities, Mardas predicted, would respond by imposing controls on the movement of money for as long as it takes for the panic to subside. Against this plan, a political initiative, the so-called

Menoume Europi Stay in Europe, also known by Menoume Europi or Menoume Evropi ( el, Μένουμε Ευρώπη) is an initiative that surged in Greece since the elections of 2015. The concerns over the Grexit activated people with different political, ideologi ...

was founded in 2012 by students in

Oxford University Oxford () is a city in England. It is the county town and only city of Oxfordshire. In 2020, its population was estimated at 151,584. It is north-west of London, south-east of Birmingham and north-east of Bristol. The city is home to th ...

, and it spread among Greek students in other European universities. The first demonstration took place in Athens, Syntagma Square in June 2012 in between two major elections that brought to the country political instability and financial insecurity. A Grexit, assuming that it coincided with adoption of a new currency, would require preparation, for example with capacity for banknote stamping or printing a stock of new banknotes. However, information leaking out on such preparations might lead to negative dynamic effects, like bank runs. Conversely, leaving the Eurozone, but retaining the Euro as de facto currency, would avoid the practical issues and relieve the country of the burden of its Eurozone responsibilities. In the event of a new currency being introduced, all banks would close for several days to allow old (Euro) banknotes to be stamped to denote that they were now drachmas, and/or a newly printed currency to be distributed to bank branches for distribution to the public when banks reopened. The British money printing company De La Rue was, according to rumours on 18 May 2012, preparing to print new drachma notes based on old moulds, which De La Rue refused to comment. The typical time between an order for a new currency being placed and the delivery of the banknotes is about six months.

Wolfson Economics Prize

In July 2012, the

Wolfson Economics Prize The Wolfson Economics Prize is a £250,000 economics prize, the second largest economics prize in the world after Nobel. The Wolfson Prize is sponsored by The Baron Wolfson of Aspley Guise, CEO of retailer Next plc Next plc (styled as NEXT) ...

, a prize for the "best proposal for a country to leave the European Monetary Union", was awarded to a Capital Economics team led by Roger Bootle, for their submission titled "Leaving the Euro: A Practical Guide". The winning proposal argued that a member wishing to exit should introduce a new currency and default on a large part of its debts. The net effect, the proposal claimed, would be positive for growth and prosperity. It also called for keeping the euro for small transactions and for a short period of time after the exit from the eurozone, along with a strict regime of inflation-targeting and tough fiscal rules monitored by "independent experts". The Roger Bootle/Capital Economics plan also suggested that "key officials" should meet "in secret" one month before the exit is publicly announced, and that eurozone partners and international organisations should be informed "three days before". The judges of the Wolfson Economics Prize found that the winning plan was the "most credible solution" to the question of a member state leaving the eurozone.

Immediate economic fallout inside Greece

On 29 May 2012, the

National Bank of Greece The National Bank of Greece (NBG; el, Εθνική Τράπεζα της Ελλάδος) is a global banking and financial services company with its headquarters in Athens, Greece. 85% of the company's pretax preprovision profits are derived ...

(not to be confused with the central bank, the Bank of Greece) warned that " exit from the euro would lead to a significant decline in the living standards of Greek citizens." According to the announcement,

per capita income Per capita income (PCI) or total income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its total population. Per capita i ...

would fall by 55%, the new national currency would depreciate by 65% vis-à-vis the euro, and the recession would deepen to 22%. Furthermore, unemployment would rise from its current 22% to 34% of the work force, and inflation, which was then at 2%, would soar to 30%. According to the Greek think-tank Foundation for Economic and Industrial Research (IOBE), a new drachma would lose half or more of its value relative to the euro. This would drive up inflation, and reduce the

purchasing power Purchasing power is the amount of goods and services that can be purchased with a unit of currency. For example, if one had taken one unit of currency to a store in the 1950s, it would have been possible to buy a greater number of items than would ...

of the average Greek. At the same time, the country's economic output would drop, putting more people out of work where one in five is already unemployed. The prices of imported goods would skyrocket, putting them out of reach for many. Analyst Vangelis Agapitos estimated that inflation under the new drachma would quickly reach 40 to 50 per cent to catch up with the fall in the new currency's value. To stop the falling value of the drachma, interest rates would have to be increased to as high as 30 to 40 per cent, according to Agapitos. People would then be unable to pay off their loans and mortgages and the country's banks would have to be nationalised to stop them from going under, he predicted. IOBE head of research Aggelos Tsakanikas foresaw an increase in crime as a consequence of a Grexit, as people struggled to pay bills. "We won’t see tanks in the streets and violence, we won’t see people starving in the streets, but crime could very well rise".

Political opinion

The centre-right

New Democracy New Democracy, or the New Democratic Revolution, is a concept based on Mao Zedong's Bloc of Four Social Classes theory in post-revolutionary China which argued originally that democracy in China would take a path that was decisively distinc ...

party has accused the leftist SYRIZA of supporting withdrawal from the euro. However, SYRIZA's leader, Alexis Tsipras, has stated that Greece should not leave the eurozone and return to the drachma because "...we will have poor people, who have drachmas, and rich people, who will buy everything with euros." Past opinion polling had shown that generally most Greeks favored keeping the euro. Of all the political parties which won seats in the parliamentary election in May 2012, the Communist

KKE The Communist Party of Greece ( el, Κομμουνιστικό Κόμμα Ελλάδας, ''Kommounistikó Kómma Elládas'', KKE) is a political party in Greece. Founded in 1918 as the Socialist Labour Party of Greece and adopted its curren ...

expressed support for leaving both the euro and the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...

. However, its General Secretary,

Dimitris Koutsoumpas Dimitris Koutsoumpas ( el, Δημήτρης Κουτσούμπας, ; born 10 August 1955) is a Greek communist politician and MP who has been the General Secretary of the Communist Party of Greece since 14 April 2013. Political career Dimitri ...

, pondered: "The exit from the EU and the euro will be hazardous, a blind alley unless it is combined with a concrete plan, a programme for the economy and society, with a new organization of society, i.e. a socialist society with the socialization of the concentrated means of production, unilateral cancelation of the debt, working class and people's power." Golden Dawn is also staunchly Eurosceptic, opposing Greece's participation in the

and the

eurozone The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro ( €) as their primary currency and sole legal tender, and have thus fully implemented EMU polici ...

. On 21 August 2015, 25 MPs from SYRIZA split from the party and formed Popular Unity, which fully supports leaving the euro. In the

September 2015 Greek legislative election Legislative elections were held in Greece on Sunday, 20 September 2015, following Prime Minister Alexis Tsipras' announced resignation on 20 August. At stake were all 300 seats in the Hellenic Parliament. This was a snap election, the sixth since ...

, the party won 2.8% of the popular vote, winning no seats. Both the Greek government and the EU favour Greece staying within the Euro and believe this to be possible. However, some commentators believe an exit is likely. In February 2015, the former head of the

US Federal Reserve The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...

Alan Greenspan Alan Greenspan (born March 6, 1926) is an American economist who served as the 13th chairman of the Federal Reserve from 1987 to 2006. He works as a private adviser and provides consulting for firms through his company, Greenspan Associates LLC. ...

, said "it is just a matter of time" for Greece to withdraw from the eurozone, and former

United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the European mainland, continental mainland. It comprises England, Scotlan ...

Chancellor of the Exchequer

Kenneth Clarke Kenneth Harry Clarke, Baron Clarke of Nottingham, (born 2 July 1940), often known as Ken Clarke, is a British politician who served as Home Secretary from 1992 to 1993 and Chancellor of the Exchequer from 1993 to 1997 as well as serving as de ...

described it as inevitable. A leaked document revealed that, during informal discussions with one of the European leaders, then UK Prime Minister David Cameron suggested that Greece might be better off if it exited the eurozone. British officials declined to comment on the leaked document.

Economic criticism

Richard Koo Richard C. Koo ( ja, リチャード・クー, ; ; born 1954) is a Taiwanese-American economist living in Japan specializing in balance sheet recessions. He is Chief Economist at the Nomura Research Institute. Early life and education Koo was bo ...

, chief economist for

Nomura Research Institute Nomura Research Institute, Ltd. (NRI; Japanese: 株式会社野村総合研究所 or 野村総研 for short) is the largest economic research and consulting firm in Japan, and a member of the Nomura Group. Established in 1965, the firm now emp ...

, accused IMF and EU of basing their negotiation position on unrealistic assumptions. As Koo pointed out, IMF's argument was that if the austerity programme had been implemented as assumed, no further debt relief would have been needed under 2012's framework.Nomura slams the IMF: The Greek bailout is highly unrealistic
O. Williams-Grut, Business Insider, Finance, 15 July 2015 The EU's argument was that Greece encountered a difficult situation in 2015 because it delayed implementation of structural reforms. Koo said that the argument was highly unrealistic because structural reforms do not work in a short run, adding that the US did not benefit from the

Reaganomics Reaganomics (; a portmanteau of ''Reagan'' and ''economics'' attributed to Paul Harvey), or Reaganism, refers to the neoliberal economic policies promoted by U.S. President Ronald Reagan during the 1980s. These policies are commonly associat ...

structural reforms during Reagan's era. After publishing documents which admit that the southern European country needs debt relief and a moratorium on debt repayment for 30 years, the IMF was only "slowly beginning to understand" the Greek economy, said Koo.

2015 Grexit speculation

In January 2015, speculation about a Greek exit from the eurozone was revived when Michael Fuchs, deputy leader of the center-right

CDU/CSU CDU/CSU, unofficially the Union parties (german: Unionsparteien, ) or the Union, is a centre-right Christian-democratic political alliance of two political parties in Germany: the Christian Democratic Union of Germany (CDU) and the Christian Soc ...

faction in the

German Bundestag German(s) may refer to: * Germany (of or related to) ** Germania (historical use) * Germans, citizens of Germany, people of German ancestry, or native speakers of the German language ** For citizens of Germany, see also German nationality law **Ge ...

, was quoted on 31 December 2014: "The time when we had to rescue Greece is over. There is no more blackmail potential. Greece is not systemically relevant for the euro." A following article in the weekly Spiegel citing sources from

Wolfgang Schäuble Wolfgang Schäuble (; born 18 September 1942) is a German lawyer, politician and statesman whose political career has spanned for more than five decades. A member of the Christian Democratic Union (CDU), he is one of the longest-serving politi ...

ministry of finance A ministry of finance is a part of the government in most countries that is responsible for matters related to the finance. Lists of current ministries of finance Named "Ministry" * Ministry of Finance (Afghanistan) * Ministry of Finance and Ec ...

further spurred these speculations. Both German and international media widely interpreted this as the Merkel government tacitly warning Greek voters from voting for SYRIZA in the upcoming

legislative election A general election is a political voting election where generally all or most members of a given political body are chosen. These are usually held for a nation, state, or territory's primary legislative body, and are different from by-elections ( ...

of 25 January 2015. Germany's largest selling tabloid, the

right-wing populist Right-wing populism, also called national populism and right-wing nationalism, is a political ideology that combines right-wing politics and populist rhetoric and themes. Its rhetoric employs anti- elitist sentiments, opposition to the Establ ...

Bild, raised further anger when it compared Greece to an unfair footballer: "What happens to a footballer who breaks the rules and does a crude foul? – He leaves the pitch. He is sent off as a punishment. No question." The German government's interference in the January 2015 elections in Greece was strongly criticized by leaders of European Parliament groups including Socialists & Democrats (S&D), the liberal ALDE and the Greens/EFA group, when S&D president

Gianni Pittella Giovanni Saverio Furio Pittella (born 19 November 1958) is an Italian politician who served as Leader of the Progressive Alliance of Socialists and Democrats Group from 2014 to 2018 and Member of the European Parliament (MEP) from Italy from 1999 ...

said, "German right-wing forces trying to act like a sheriff in Greece or any other member states is not only unacceptable but above all wrong." It has also been criticized by the German opposition party

The Greens The Greens or Greens may refer to: Current political parties *Australian Greens, also known as ''The Greens'' *Greens of Andorra * Greens of Bosnia and Herzegovina *Greens of Burkina * Greens (Greece) * Greens of Montenegro *Greens of Serbia *Gree ...

', with its speaker

Simone Peter Simone Peter (born 3 December 1965) is a German Alliance 90/The Greens politician. Between 2013 and 2018, she co-chaired the party along with Cem Özdemir. Political career Between 2009 and 2012, she was Saarland's State Minister for the Environ ...

calling the debate over a Grexit "highly irresponsible". Economists of German Commerzbank said that preventing a Greek exit was still desirable for Germany, since a Greek exit would wipe out billions of euros in European taxpayer money, and "it would be much easier politically to renegotiate a compromise with Greece, albeit a lame one, and thus maintain the fiction that Greece will pay back its loans at some point in time." FTSE "considers Grexit following the election to be highly unlikely...". On 9 February, UK Prime Minister David Cameron chaired a meeting to discuss any possible ramifications in the event of an exit. According to a

Bloomberg Bloomberg may refer to: People * Daniel J. Bloomberg (1905–1984), audio engineer * Georgina Bloomberg (born 1983), professional equestrian * Michael Bloomberg (born 1942), American businessman and founder of Bloomberg L.P.; politician and m ...

report

George Osborne George Gideon Oliver Osborne (born Gideon Oliver Osborne; 23 May 1971) is a former British politician and newspaper editor who served as Chancellor of the Exchequer from 2010 to 2016 and as First Secretary of State from 2015 to 2016 in the ...

said at the meeting of the

G-20 The G20 or Group of Twenty is an intergovernmental forum comprising 19 countries and the European Union (EU). It works to address major issues related to the global economy, such as international financial stability, climate change mitigation, ...

finance ministers in Istanbul: "A Greek exit from the euro would be very difficult for the world economy and potentially very damaging for the European economy." In February 2015, the Russian government stated that it would offer Greece aid but would only provide it in

rubles The ruble (American English) or rouble (Commonwealth English) (; rus, рубль, p=rublʲ) is the currency unit of Belarus and Russia. Historically, it was the currency of the Russian Empire and of the Soviet Union. , currencies named ''rub ...

. Kathimerini reported that after 16 February

Eurogroup The Eurogroup is the recognised collective term for the informal meetings of the finance ministers of the eurozone—those member states of the European Union (EU) which have adopted the euro as their official currency. The group has 19 membe ...

talks Commerzbank AG increased the risk of Greece exiting the euro to 50%. The expression used by ''Time'' for these talks is "Greece and the Euro Zone dance on the precipice". After an emergency meeting of eurozone finance ministers (20 February 2015), European leaders agreed to extend Greece's bailout for further four months. By late June 2015 negotiations on a deal had collapsed, and Prime Minister Alexis Tsipras called a

referendum A referendum (plural: referendums or less commonly referenda) is a direct vote by the electorate on a proposal, law, or political issue. This is in contrast to an issue being voted on by a representative. This may result in the adoption of a ...

for 5 July on the revised proposals from the IMF and the EU, which he said that his government would campaign against. The referendum was defeated by a margin of 61% to 39%. Eurozone finance ministers have refused to extend the bailout. Questioned on whether the referendum would be a euro-drachma dilemma, Greece's finance minister, Yanis Varoufakis, said that European Treaties make provisions for an exit from the EU but do not make any provisions for an exit from the Eurozone. A referendum as a choice involving exit from the Eurozone would violate EU Treaties and EU Law.

Theorized effects on world economies

Effect upon the European economy

Claudia Panseri, head of equity strategy at

Société Générale Société Générale S.A. (), colloquially known in English as SocGen (), is a French-based multinational financial services company founded in 1864, registered in downtown Paris and headquartered nearby in La Défense. Société Générale ...

, speculated in late May 2012 that eurozone stocks could plummet up to 50 percent in value if Greece makes a disorderly exit from the eurozone. Bond yields in other European nations could widen 1 percent point to 2 percent points, negatively affecting their ability to service their own sovereign debts.

Effect upon the world economy

Europe in 2010 accounted for 25 percent of world trade, according to

Deutsche Bank Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...

. Economic depression within the European economy would ripple worldwide and slow global growth. However, Greece represents just a small fraction—less than 2 per cent—of European

gross domestic product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is oft ...

(GDP).

Legality

working paper A working paper or work paper may be: *A working paper or technical paper. Often, authors will release working papers to share ideas about a topic or to elicit feedback before submitting to a peer reviewed conference or academic journal. Worki ...

published 2009 by the

concluded: In the absence of any ruling by the European Court of Justice, the question of whether a country can unilaterally leave the Eurozone without leaving the EU is unclear. The Williams Stamps Farish Professor in Law at the

University of Texas The University of Texas at Austin (UT Austin, UT, or Texas) is a public research university in Austin, Texas. It was founded in 1883 and is the oldest institution in the University of Texas System. With 40,916 undergraduate students, 11,075 ...

School of Law has suggested that under certain conditions, it is possible for a Member State to do so.

References

External links

"Viewpoints: What if Greece exits euro"?
14 May 2012

{{Euro topics 2010s in Greece Eurozone crisis Greek government-debt crisis Public policy proposals 2012 in Greece 2013 in Greece Greece and the European Union Euroscepticism in Greece