Grexit: The Solution to the Euro Crisis

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Grexit : the solution to the euro crisis ?
With Greece facing the possibility of a chaotic exit from the euro, the Eurozone’s downward spiral is moving at a faster pace. Financial institutions, governments and shareholders are starting to anticipate for Greece to discontinue using the euro as its currency, a change that may bring the whole global financial system in distress. The question we should now ask ourselves is, how big is the chance of this happening, and if so what kind of consequences will it have for Greece and the Eurozone? The economy of Greece’s has been downsizing ever since the beginning of 2007. The GDP of Greece was in the second quarter of this year 6% lower than the previous year, and in accordance with the OECD, is expected to drop by 5½% in total this year and 1½% the following year. If the OECD projections are indeed correct, Greece’s economy in 2013 is going to be about 80% of the extent it was in the year 2007. The reduction of the leverage ratio following the financial crisis in combination with the fiscal policy in order to cope with the sovereign debt crisis, has resulted in more than just a recession. It has evoked a political repercussion that has made it more challenging for governments to stick to to the bailout packages which had provided relief for a short period of time from the critical situation. Greece has obtained two very large bail-out packages in the last few years, €110bn in 2010 and €130bn in the beginning of this year, which summed up equals more than its annual GDP. (GDP in 2011 was around €220bn.) Nevertheless, the bailout packages are only a tantalizing combination of delicate agreements to support distinctly divided outlooks on policies, failure to uphold one section of the package agreement might disarray the whole assemblage. Because it very doubtful that Greece will have a government that will carry through on bailout conditions, a Greek default and exit from the euro is now alarmingly plausible. The Greek...
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