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Is Europe really safe in the event of a Grexit?

The country's room to manoeuvre really is almost gone

Ben Chu
Tuesday 16 June 2015 09:11 BST
Greece must repay €1.6bn to the IMF on 30 June or find itself in a technical sovereign default
Greece must repay €1.6bn to the IMF on 30 June or find itself in a technical sovereign default (AP)

Greece is on the brink of crashing out of the eurozone. So what’s new? Haven’t we been reading headlines like that for the past three years?

The difference now is that room for manoeuvre really is almost gone. The country’s bailout is due to run out at the end of the month. Athens will also default in just 15 days unless its creditors agree to release €7.2bn in aid between now and then.

The politics is also lethally unpropitious. Creditors are insisting on more austerity in return for the cash and a fresh bailout. But Alexis Tsipras was elected on a very clear platform of rejecting further cuts and he may not be politically able to deliver the cuts that are being demanded.

So could Greece set back the UK recovery, even reverse it? The panjandrums of the eurozone insist that there will be no financial or economic “contagion” if Greece slips out of the euro embrace, because the system has been shored up in the past three years. Europe can take or leave Greece, they insist. Perhaps they’re right.

But we’d do well to remember that these are the same people who confidently predicted back in 2010 that Greece would rapidly return to growth after taking an invigorating dose of their carefully distilled austerity medicine. And look how that turned out.

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