Greeks fearful of euro exit as crisis gathers

Greeks fear that if their country is forced out of the eurozone, and much of the speculation is that it will be, then they will face soaring prices with the return to a drachma which must fall sharply. Greece goes into a second election in six weeks on June 17, with the vote shaping up as a straight choice - accept the tough conditions of an EU-IMF debt bailout and stay in the euro bloc, or refuse them and face the consequences.
Inconclusive May 6 polls saw a majority vote against the bitter medicine of spending cuts and tax hikes but if the choice is narrowed down, analysts believe the country will opt to stay in and hope some terms can be softened.
If they find themselves ejected, everyone agrees there could be chaos as a new drachma would almost certainly lose at least half its value in days, likely bringing the banks down and the country to its knees.
Once a taboo subject, the idea Athens could quit the bloc has gained ground slowly as the crisis has rumbled on from a first insufficient bailout of 110 billion euros in 2010, to the contagion problems which sank Ireland and Portugal in 2011 and then the latest 240 billion euros rescue agreed late last year.
Germany in particular takes a hard line, insisting Greece stick to the terms of the debt rescue although as the focus has changed recently to the need for growth rather than more austerity in Europe, others have stressed the desire to keep Athens on board.
"Most analysts think that Greece is going to leave the eurozone and have to devalue so as to get its economy going again, cut the external deficit, and that that will not be too serious for the bloc," said Patrick Artus of Natixis investment bank.
In a report, Artus said that a devaluation would not help Greece, far from it, because it has little industry and is a major importer, especially to cover its food needs. "A devaluation's main effect would be to increase the price of imports," he said, with a consequent spike in inflation pressures.
For Miranda Xafa, head of EF Consulting, "a return to the drachma will bring only pain and be of no benefit in solving Greece's two key problems - an unsustainable debt burden and an uncompetitive economy".
European parliament chief Martin Schulz warned Friday against any Greek exit from the eurozone, saying the country's economy could collapse within days if it abandoned the single currency.
"I am not saying this option does not exist, but I consider it very risky," Schulz added, predicting the Greek economy "would collapse within days" and see European countries called on to give billions more in emergency funds.