Argument: Default would devastate Greek and global economies

Issue Report: Greece bailout


Stephanie Flanders. “Default is no soft option”. BBC News. May 2010: “The short-term cost to the economy would be huge. Imagine the Greek government stopped paying interest on its debt tomorrow. It would still have a primary deficit – excluding interest payments – of more than 8% of national income, and it might not have anyone to borrow that money from. That could mean more austerity, not less, especially if the country remained in the euro. There would also be the collapse of the domestic banking system to consider, Greek banks being the largest holders of Greek sovereign debt. And that’s before you get even to the costs of contagion (or spread) for other countries, as investors wonder who will be next.”

IMF director of external relations Caroline Atkinson: “default is not on the table, has not been on the table. The Greek authorities themselves have repeated that.”[1]