Contagion Fears

Europe Braced for Grexit Chaos

Stars of euro sculpture ecb dpa
The Euro star sculpture outside the former ECB building in Frankfurt.
  • Why it matters

    Why it matters

    If Greece leaves the euro zone, other countries could follow suit.

  • Facts


    • Greece’s economy accounts for less than 2 percent of the euro zone, but its crisis is affecting the whole region.
    • Italy and Portugal both have debts of over 130 percent of GDP and their economies appear fragile.
    • The euro has held steady against the dollar despite the turmoil.
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The sight of a smartly dressed Greek man crying, slumped to the floor in despair after trudging between four banks trying to withdraw a pension on behalf of his wife, has become the symbol of the country’s despair.

It has also, in many ways, become a warning to many other countries in the euro zone: follow the path Greece has taken and your pensioners too will wait anxious and exhausted outside banks trying to access their money.

The first question on everyone’s minds is: what will happen to Greece? Will it have its debts restructured, will it leave the euro? The second question is: what happens then to other countries in Europe, in particular Portugal and Italy, which also have large debts, sluggish growth and unstable politics.

Any choice that European leaders make this week will have consequences for the euro, and the politics of E.U. member states.

“There is a possibility of political contagion, especially if the European Central Bank and the IMF come back to the table and recognize the new Greek mandate. It will be natural for other anti-austerity movements to say, well why can’t we get the same terms,” James Wood-Collins, chief executive of London-based Record Currency Management, told Handelsblatt Global Edition.

“The alternative scenario is that Greece trickles out of the euro. The interesting point to look for is if there is a chain of circumstances that dispels the idea that joining the euro zone is irreversible.”

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