The domino effect of a Greek default is almost inevitable because of the integrated banking system within Europe, Erik Britton, director at Fathom Consulting, told CNBC. Britton said that once Greece defaults, contagion will spread to Portugal and Ireland — and possibly Spain and Italy.
The disorderly default of Greece would mean the end of the euro and the idea that such a default could be ring-fenced neatly was fanciful, Britton said.
Greece is sinking deeper into a financial situation that some describe as recession and others describe as depression. In any case, there is rapidly shrinking optimism that the nation can avoid default.
According the International Business Times, the economy is forecast to contract by 5.5 percent in 2011 and a further 2.5 percent in 2012. This will send total public debt to a dizzying 161.8 percent of GDP for this year and 172.7 percent in 2012.
The inspectors of the so-called troika — the European Union (EU) leadership, the International Monetary Fund (IMF), and the European Central Bank (ECB) — agreed to release an additional $11 billion in return for a package of further Greek austerity measures, the International Business Times reported.
Nonetheless, the Times reports, talk will not go away concerning the possible need to protect banks against an eventual Greek default.
European Commission President Jose Barroso has said that such efforts must be a coordinated approach. The details of such a plan have yet to be revealed.
Britton told CNBC the plan to recapitalize banks has to be big enough to cover a default by Greece, Ireland and Portugal and possibly Spain and Italy.
Megan Greene, head of European economics at Roubini Global Economics, agrees with Britton and others who believe that the days of the euro are limited.
She told CNBC that it was just a matter of time before Greece defaults and leaves the eurozone.
She added that there would be a ripple effect across the eurozone and in 5 years to 10 years, there would be no eurozone.
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