Tags: Greek | Euro | Exit | Lehman

Experts: Greek Euro Exit Wouldn’t Resemble Lehman Brothers Collapse

Friday, 15 Jun 2012 08:26 AM

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Greece goes to the polls on Sunday and may fill its parliament with politicians that could lead the country out of the eurozone.

Don't expect such a move to rattle the global financial system on the level the Lehman Brothers collapse did, experts say, as the Greek crisis has been brewing for while and won't come from out of the blue like Lehman's demise in 2008.

Households and businesses for years now have been stashing money out of Greece and into safe-haven venues like Germany or Switzerland, while foreign business have kept receivables paid as much as possible in Greece.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Meanwhile, policymakers can quietly draw up contingency plans for a Greek exit of the eurozone, which wasn't the case when Lehman Brothers imploded.

"The consequences are incalculable — nobody can pretend to know what would happen," Holger Schmieding, chief economist of Berenberg Bank in London, tells The New York Times.

"Policymakers are very aware this is a high-risk event and are thinking through possibilities, which they didn't do before Lehman."

Other experts point out Europe could endure a Greek exit.

"I do believe it would be tolerable for the remaining member states," says Ferdinand Fichtner, head of forecasting at the German Institute for Economic Research in Berlin, which advises the German government, The New York Times adds.

"It should be the last option."

Greece will elect a new parliament on Sunday after a May election produced a standoff, with politicians from the leftist Syriza political party refusing to help build a coalition government over opposition to austerity measures.

Previous Greek administrations agreed to tough austerity measures such as tax hikes and layoffs in exchange for roughly $170 billion in bailout money.

Syriza leaders say austerity measures cut into growth and have exacerbated the downturn, while supporters of sticking with the bailout, namely the conservative New Democracy party, say the country should stay the course, as better days await, adding exiting the euro would be disastrous.

Both New Democracy and Syriza have run neck and neck in the polls.

"It's like the country is suffering from bipolar mood swings," a leading Greek pollster, speaking on condition of anonymity because of a ban imposed two weeks before voting, tells the Los Angeles Times.

"One day is entirely different from the next, and it's bound to continue like this down to the wire."

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.



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