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Q & A

Q: Will Greece leave the euro?

A: Not yet. If last night's exit polls were accurate, New Democracy, the conservative party which favours the EU/IMF bailout, will be able to form a government. The EU/ECB/IMF troika will continue lending Greece the money it needs to repay its creditors and maintain public services. In return, the new Greek government will continue to implement the austerity measures demanded by the troika.

Q: So is the crisis over?

A: That's not what I said. In yesterday's election, anti-bailout parties received almost 60pc of the votes. This means that while a New Democracy-led government may have the seats in parliament, it doesn't possess the popular mandate to impose further austerity measures. With the Greek consensus in favour of austerity having broken down, we can expect the crisis to erupt again, probably within a few months.

Q: What happens then?

A: Even New Democracy, the most pro-European Greek party, made it clear that it wants to renegotiate aspects of the second bailout, negotiated last year. Meanwhile, Germany has made it clear that it is not for turning, with German vice-chancellor Philip Roesler warning Greece against attempting to put a gun to Europe's head. Expect a re-run of the Greek crisis followed by Greece's departure/expulsion from the euro within a few months.

Q: What would the implications of Greece leaving the euro be?

A: With just 2pc of the eurozone's economic output, Greece's departure from the single currency should, in theory at least, be very manageable. In practice, things could turn out to be a lot messier. If one country can leave the euro, why not others? Once the taboo has been broken, the markets would test the determination of other peripheral eurozone countries -- Spain, Italy, Portugal, and Ireland -- to stay the course. Some analysts are already speaking of Greece's exit from the euro as the eurozone's "Lehman moment".

Q: What does this mean for Ireland?

A: Under the terms of the November 2010 bailout, Ireland is scheduled to return to the bond markets next year. That timetable always looked a tad optimistic. Greek withdrawal from the eurozone, either now or in a few months' time, would put paid to any hopes of an Irish return to the bond markets any time soon and make a second EU/IMF bailout for this country inevitable.

Q: Is my money safe?

A: That literally is the €64bn question. A victory by the left-wing, anti-bailout Syriza party, followed by Greek expulsion from the eurozone, could have sparked a European-wide banking crisis. Yesterday's election results make that far less likely. Even if Greece is eventually forced to leave the eurozone in a few months' time it will be a far less disorderly process. This will keep the chances of a major banking crisis to a minimum. Your money is safe -- for now.

Irish Independent