BUSINESS

EIU warns Grexit still a threat

TAGS: Finance

A report by the Economist Intelligence Unit (EIU) on risks to the global economy warned on Wednesday that Greece is more likely to leave the eurozone than stay in the currency union.

It added that the chances of Greece’s exit from the euro area triggering the departure of more eurozone members such as Italy in the next couple of years are estimated at between 0 and 10 percent. However, should such a development occur, it could generate a decline in global growth by one to two percentage points.

According to the EIU analysts, Greece suffers from problems such as the “deeply rooted corruption of its oligarchy” and the absence of foreign direct investment as a result of closed-shop professions, protectionism and hostility to foreign enterprises, resulting in a shortfall in competitiveness.

Consequently, the report noted, a Greek departure from the eurozone would not constitute a systemic threat for the bloc, adding that it would anticipate an intervention by the European Central Bank to contain the crisis. “We do not expect other countries to follow,” the report said, but were they to do so, it would result in major damage to Europe as well as the global economy, the EIU warned.

“If other countries departed, the global economy would be destabilized,” it said.

The report projected that any countries forced to exit the eurozone would suffer a huge devaluation of their national currency and would find it impossible to service their debts in euros. In turn, the banks would incur huge losses because of state bonds in their portfolios and the global economy would enter a recession.

Meanwhile a Eurostat report using 2016 data yesterday highlighted Greeks’ money woes, as their per capita gross domestic product per region and their purchasing power are the lowest in the European Union.

Greece is nowhere near the majority of EU regions, with the per capita gross domestic product per region standing at just 68 percent of the average.

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