Greece: nul points from the eurozone
WITH Greece's departure from the eurozone now very much a matter of when rather than if, banks and national governments are desperately making contingency plans for at least a partial break-up of the single currency.
Greece goes to the polls on June 17 for its second general election in six weeks after the May 6 poll failed to produce a governing majority. With Greek opinion polls indicating that the anti-bailout Syriza will emerge as the largest single party, the likelihood of a pro-bailout government emerging must be considered remote.
So what happens next? In a note to clients, Citibank has predicted that Greece would leave the euro at the beginning of next year. It will almost certainly happen a lot sooner than that, possibly even before the next Greek general election.
Next weekend is, as it happens, a bank holiday weekend -- not just in Ireland but also in Greece, where the Orthodox Whit weekend is being celebrated. By far the best time to spring a major financial coup such as Greek withdrawal from the euro -- which, apart from new banknotes, would also require the imposition of exchange controls -- is over a long bank holiday weekend.
Will it happen that soon? The reality is that with so many financial fires burning simultaneously, the eurozone badly needs to be shot of Greece.
Much more serious is the Spanish banking crisis, which is now rapidly spinning out of control. On a short break in Lanzarote last week, I passed a branch of Santander, supposedly Spain's strongest bank, offering depositors an annual interest rate up to 4.98 per cent for three-year money. If this is in any way representative of the funding situation facing the Spanish banks, then things are much worse than most of us had suspected.
So, despite their repeated declarations to the contrary, we can be sure that finance ministries and central banks, both inside and outside the eurozone, are busy burning the midnight oil this weekend drawing up their contingency plans for what to do when Greece leaves the single currency.
Sunday Indo Business