The Euro (EUR) exchange rate is forecast to fall over the coming sessions as concerns over Greece are set to increase.
Despite Greek politicians saying that they are optimistic that a deal over economic reforms will be reached with the indebted nations creditors, investors are not confident at all. For six years, Greece has been a thorn in the side of the single currency and patience is finally beginning to wear out. First, there was the Euro crisis, which almost brought the whole Eurozone to its knees and now Greece is yet again on the precipice of an exit from the single currency, only this time it could be forced to leave.
The main problem facing the Eurozone is that no member of the single currency bloc has ever defaulted and never left. What the implications of such a ‘Grexit’ would be on the Euro and its users is an unknown factor. Another issue is the fact that Europe’s leaders very rarely seem to agree on major issues, without political union, member states are free to disagree and in turn cause issues to drag on for far longer than they would otherwise.
Next Monday is D-day for Greece as it is forecast that the nation will run out of cash by April 8. If no deal is reached then the nation will be forced to default on its loans.
No Deal Could Cause Chaos
The lack of an agreement would likely see the imposition of capital controls on Greek banks as the government does all it can to stop people withdrawing their money from the nation.
With opinion polls suggesting that the majority of Greeks want to stay in the Euro, Prime Minister Alexis Tsipras will have to cave into the demands issued by Greece’s creditors.
A total capitulation by Tsipras would likely lead to the collapse of the Syriza led anti-austerity government and see fresh elections being held. The best-case scenario in this instance would see the formation of a pro-EU government, which sees Greece remain in the Euro but continue to suffer the effects of harsh austerity measures and spark a new recession.
The worst-case scenario for such an instance however could see Greeks venting their anger against the country’s creditors and see public opinion shift to one of defiance and an anti-EU mindset. The nation could choose to leave the leaving and take its chances on creating a new currency.
The bad blood between Greece and Germany could intensify further to the point where the country votes to leave the European Union completely, something that the EU would not want to happen due to Greeces strategically important location.
The impact of the biggest default in history would also surely plunge Europe back into recession and increase calls for a Euro exit in nations such as Italy and Spain. The UK could choose to leave the EU too as it would seek ways to shield itself from the blowback.
Even worse, for the EU could be that Athens turns to its rivals in Moscow for assistance, a scenario that could lead to Russia establishing a presence in the Mediterranean.
