What would happen if Greece leaves the Eurozone?

theEconomy; Enlightened...

It’s what everyone’s been talking about. If Greece was to actually leave,the total cost to Europe could be around 400 billion euros. But that’s not all; the cost of contagion could amount to another trillion euros (Bloomberg, 2012). The rippling effects which this could have on Portugal, Italy, Spain and their interest rates, GDP and employment levels are likely to continue to slump.

Yet, before we reveal the gory details, lets look back to 2009 when the newly elected Greek government discovered that the budget deficit was double what it should have been, that is 12.7% instead of 6%. Government officials decided to borrow billions from their neighboring countries hoping to cut the size of their deficit significantly whilst promising to slash the government spending and raising taxes. This was a tough medicine to swallow, and the austerity measures were not so easily imposed. As their deficit problems persisted deeper with the…

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