Germany has issued the most explicit warning yet of Greece’s exit of the Euro Zone. Greece is only days away from a 1.6 billion ($1.8 billion) euro payment to the International Monetary Fund and it seems increasingly likely that the country will default on that payment. Default could cause Greece to exit the Euro Zone and rely on a new currency.
The Greek economy was hit hard Monday with National Bank of Greece closed down 5.7% and Bank of Piraeus was 12.2% lower.
Of course, a new currency would hit the already fragile economy even harder. A new currency would not be as strong or stable as the euro and it would hold a much lower value. This could lead to Greek property and assets plummeting in value if transitioned to a new currency.
“The shadow of a Greek exit from the euro zone is becoming increasingly perceptible, Greece’s game theorists are gambling the future of their country. And Europe’s too,” wrote German Economy Minister and Vice-Chancellor Sigmar Gabriel. The statement came in a Bild newspaper opinion column which was published Monday.
“It’s not France’s position to impose on Greece further cuts to smaller pensions, but rather to ask that they propose alternatives, we have to get to work… everything must be done in order that Greece remains in the eurozone,” said French President Francois Hollande.
All sides publicly say that they would like Greece to remain in the Euro Zone and secure a more stable footing. However, the agreement seems to end there. The Greek government, led by Prime Minister Alexis Tsipras, has spoken against the austerity measures that world governments, especially Germany, have tried to force as a condition for more funding. Tsipras and his Syriza Party were elected to power on a platform of preventing further austerity measures and trying to provide relief to the Greek people. As negotiations have continued, Tsipras gave an address to members of his party where he lashed out against Greece’s creditors, saying that they are attempting to “humiliate not only the Greek government – this would be the least important – but humiliate an entire people.” He also spoke about the magnitude of the problem that Greece is facing, “I’m certain future historians will recognize that little Greece, with its little power, is today fighting a battle beyond its capacity not just on its own behalf but on behalf of the people of Europe.”