NPR logo

What Would A Greek Default Mean To Europe?

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
What Would A Greek Default Mean To Europe?


What Would A Greek Default Mean To Europe?

What Would A Greek Default Mean To Europe?

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Financial analysts speculate that Greece will default on some, or all, of its national debt. If that happens, more and more analysts believe Greece will be forced out of the eurozone. Seventeen countries use the euro.


Default or not, there are plenty of questions about what the Greek crisis means for Europe, really the rest of the world. NPR's Philip Reeves put those questions to some financial experts in London.

PHILIP REEVES: One big question hangs over Europe right now: what if? What if all the efforts to bail out Greece eventually fail and the Greeks leave the eurozone? Not so long ago, that question would have sounded far-fetched. Not anymore. Michael Hughes is among a growing number of economics analysts who think the Greeks will be forced out of the currency.

MICHAEL HUGHES: I think they will. My expectation is that you will see a different Europe coming out of this.

REEVES: Seventeen countries use the euro. By comparison with the heavyweights - Germany, France, and Italy - Greece is very small. Yet if any of the 17 pull out of the currency, the impact would be momentous, says Martin Wolf, chief economics commentator for the Financial Times.

MARTIN WOLF: An exit from the euro is an Armageddon event. It is a political event of the first order. It involves, in some way, disassembling the European Union itself. It could not be done without triggering a wave of capital flight and banking sector implosion. My own view is not just in Greece but in quite a number of other countries, they will do everything in their power, I would assume, to prevent that.

REEVES: What if that can't be prevented? How do you, in fact, leave the euro?

WOLF: You would have to reintroduce capital controls, very difficult to do, very difficult to make work. You would have to close your banks. You'd have to issue a new currency, and separate your central bank from the European system of central banks. You would be breaking EU law and technically you would have to be thrown out of the European Union.

You couldn't do any of this, without somebody realizing this was going to happen. So the runs would occur at once. You would trigger runs, in my view, across much of Mediterranean Europe, so it would be a major systemic crisis.

ANDREW LILICO: When Greece withdrawals from the Euro - and I think it is when, rather than if - the Greek banks will all be nationalized. The Greek government will devalue something like 50 to 70 percent.

REEVES: Andew Lilico is from the economics policy consultancy, Europe Economics.

LILICO: All Greek debts will be redenominated into the new drachma or whatever the new Greek currency is called. The consequences of this will be very large losses for certain banks in other parts of the eurozone, there'll be spillover effects from that

REEVES: That spillover would be felt globally, including in the US. In Europe, says Michael Hughes, the crisis would threaten other economically weak Eurozone countries.

HUGHES: Because if you have a Greek default or if Greece leaves, the markets will automatically believe that other countries - and particularly, Portugal and Spain - might head the same way. So you are really looking at a scenario which can divide the euro, generally, and may not just be as specific as Greece alone leaving.

REEVES: In other words, the eurozone would unravel. Martin Wolf of the Financial Times thinks if that happens, the European single market would fall apart and the European Union itself, the foundation stone of post war regional stability, would be at risk. The stakes could hardly be higher, which is why Wolf thinks the current negotiations over the Greek bail-out will go down to the wire.

WOLF: I understand that Greece will run out of money in about three weeks. So if that's correct, I would expect the negotiations to go on for almost that long, but to be successful in the end - in the sense that they won't allow Greece to default at this stage. I actually think, given the international context, the pressures, it just sort of seems inconceivable that they won't come through in the end.

REEVES: Philip Reeves, NPR News, London.

GREENE: And you've been hearing the reporting of Philip Reeves right here on MORNING EDITION from NPR News.

Copyright © 2011 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.