Living standards in Greece could fall, banks will face the prospect of collapse, savings may be frozen, businesses could go bankrupt and the cost of imports could multiple.
2. Bank runs
Regular citizens will empty their bank accounts before they converted into a new currency worth less than the previous one. The government may impose a freeze on withdrawal and banks from other countries that have lent to Greece could also collapse.
3. Business bankruptcies
Due to legal tangles over the nature of currency in contracts, Greek businesses may face legal and financial disaster. Companies will still owe big debt but will pay in devalued non-euro currency. Many businesses will become insolvent and face bankruptcy while lenders and biz partners of local companies will be looking at big losses.
4. Sovereign debt crisis
Investors could become nervous about lending to other struggling countries, This might leave Spain and Italy, which account for 28% of the total economy of the Eurozone, short of funds.
5. Market turmoil
A Greek exit from the Eurozone could force lenders and investors to sell off their risky investments. This will cause the stock markets to crash. High-risk borrowers may face higher borrowing costs, Certain safe investments like the dollar, en, Swiss franc, gold could rise and these governments could borrow cheaper.
6. Political Backlash
European governments and banks will face big losses on the loans they gave which will prevent some bigger nations like Germany, providing bailouts to other countries that might need it. ECB’s role of providing rescue loans could be exposed.
European banks will be forced to stop lending and business will then cut investment. Ordinary people may cut back their own spending due to bad news in the media. This might push the country in to recession. More