Europe could suffer less disastrous consequences caused by Greece’s exit from the eurozone (or Grexit) as they could have been a few years ago.
Private investors are holding just 15% of Greece’s debt securities. The other ones are debt liabilities against the troika of the international creditors (the European Central Bank, International Monetary Fund, and the EU). Greece’s failure to pay off the bailout loans is unlikely to spark big panic among banks. Europe will not allow Greece to leave the eurozone as the Balkan country is bound by the troika’s requirements.
Importantly, Greece’s GDP has eventually shown annual growth for the recent four years. Meanwhile, unemployment rate has been declining slowly but surely for 1.5 years.
Greece committed to repay 60% of its debt after 2031. The Greek government has to refinance it.
In case of the exit from the euro area, Greece will experience instant depreciation of the new currency, high inflation, and panic in the banking sector triggering a new wave of recession. It will be the penalty for inability to settle the public debt in full.
