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> Economy

Economist: The mechanics of the Grexit

The Economist writes that Greece's severing of ties with the euro zone "would be bad both for Greece and the currency area"

Newsroom January 16 12:54

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The Economist’s article, titled “Zoning Out”, focuses on Greece’s chances of exiting the euro zone. The event had been avoided in 2012, however this time it may not be thwarted. “The mechanics of Grexit would be straightforward,” explains the article, detailing that there would be a swift change in currencies and the Greek central bank would be severed from the European Central Bank (ECB) in Franfurt.

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Estimates from the International Monetary Fund (IMF) in 2012 suggested that the drachma would fall against the euro by 50%, a reduction that could spur an eventual economic revival and make Greece more competitive. Argentina is given as an example that had noted several years of rapid growth after severing its decade-long link with the dollar in 2002.

“The hope would be that Greece could also exploit its improved competitiveness, especially by attracting more investors,” says the article.

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