Greece is already near point "zero" for the majority of its creditors and partners and there are an avalanche of gloomy scenarios for the day after the elections on June 17.
Partners, senior officials and companies must draw up plans either to dissociate Greece or to support it in an aggressive programme of economic development. At the same time, maintaining composure, they must continue to prepare for the day after the elections on June 17, which coincides with the first day of the G20 summit in Mexico.
There is a danger that the possible exit of Greece from the Eurozone, the so-called “Grexit”, will turn the country into an unsuccessful state.
Citigroup’s chief economist Willem Buiter believes that Greece will welcome New Year’s day with the Drachma since it is likely to exit the Eurozone from January 1, 2013.
The new currency will be depreciated immediately by 60 percent against the Euro and it will remain devalued by 50-60 percent over the next five years.
Where will leaving the Eurozone lead to?
"Initially the Euro/Drachma exchange rate will be announced at 1 to 1, however during the following days and weeks this rate will quickly shoot up to 1 to 1000, and shortly thereafter to 1 in 1500. This will simply mean that in order to purchase any goods, especially imported ones, we will have to pay 3 to 5 times more Drachmas than we pay today. Inflation will reach double-digit and three-digit levels. What we buy today, we will need twice as many Drachmas to buy tomorrow", notes George Kofinakos representative of StormHarbour and CEO of Enolia Premium.
Banks will collapse, interest rates will reach triple-digit figures, and all deposits will be converted into Drachmas at a rate of 1 to 1 against the euro. Therefore, while our expenses will have increased several times, our incomes will have fallen several times.
There will be at least 3 to 5 years of recession, which will be deeper than the current one, only so that Greece can return to 2012 levels! In this situation GDP will shrink by 50 percent, unemployment will exceed 45 percent, living standards will collapse, and about 50-60 percent of the population will remain below the poverty line.
Possible winners will be the rich, who have money abroad, exporters of goods and Greek shipping companies, but the middle class will disappear anda new wave of newly poor will appear. Those, who are currently poor, unemployed and pensioners, will find themselves in a more difficult situation.
The state will announce the suspension of payments and the public sector won’t be able to receive anything, as all prices will sky-rocket and goods will become inaccessible. Since the state will not be able to pay for oil and gas imports, their supplies, as well as electricity, will be interrupted for long periods of time.
The only transactions that will be possible will be those that are carried out through the exchange of goods.
The whole atmosphere will cause a national depression and will lead to suicides or emigration of a large population.
The country will remain without a government for long periods of time, as governments will be changed frequently because of the pressure and turmoil of the protests of the people. From a geopolitical point of view, the country will be at a disadvantage compared to some of its neighbours and may be forced to make painful compromises.
So if some think that the lowest level has been reached today and there is no risk of losing anything, they have made a huge mistake. Because a virtually bankrupt country with a currency that nobody around the world recognizes, will lose all support and the problem will start affecting all citizens.
What is certain is that Greece is currently experiencing a recession like the one in 1929. It should be made clear to all that a possible bankruptcy will not hit so much our creditors, but the entire nation and especially the poorest and most vulnerable. What creditors will do isto think very long and hard before giving us loans in the future, and of course under unbearable conditions.
We must not ignore the fact that in similar bankruptcies democracy and the functioning of institutions are challenged.
Is it worth it for our people to go through such a cruel ordeal, when its duration and catastrophic results are completely predictable?
The certain thing is, says George Kofinakos in conclusion, that all political forces must realize that they should govern together, as well as make a ten-year development plan for the country, which will be followed by everyone closely, in order to ensure the future of our country and children.
Four scenarios by HSBC
"Leaving the Eurozone will be a worse mistake than the introduction of the Euro in Greece" said Moorad Choudhry from the Royal Bank of Scotland. "I really cannot understand why the idea of leaving the Eurozone is so attractive for the Greek electorate", also says Jim O'Neill, chairman of Goldman Sachs Asset Management, in an interview for Bloomberg.
Stephen King, chief economist at HSBC Bank plc, outlined four scenarios for Greece’s future:
First scenario: after the elections there is a government, which supports the rescue programme and opposes Greece’s exit from the Eurozone. However, due to lack of economic development the main problems with solvency of both government and banks remain.
Second scenario: the election outcome is against the rescue programme, but no exit from the Eurozone follows, because “fire fighting” measures have been taken. Over time, however, problems reappear again.