MOSCOW, January 12 (Sputnik) — European banks and other financial institutions across the continent are stress-testing their internal systems and unwrapping contingency plans for Greece’s possible departure from the region’s monetary union following a key election slated for later this month, the Wall Street Journal reports.
The firms’ contingency plans include detailed checks on counterparties that could be significantly affected by a Greek exit, focusing on credit exposures and looking for the best possible options to provide cross-border funding to local operations.
A Greek exit from the Eurozone would certainly come at a cost to Europe, AFP reports, citing experts. The January 25 snap elections in Greece could bring to power the far-left Syriza party, which wants to abandon the austerity policy imposed by the EU and IMF as part of the country's 240-billion-euro ($282 billion) international bailout. Analysts warn that in this case Germany would be ready to let Greece leave the Eurozone and if it did Athens would be forced to repay its bailout loans and would likely default.
The Greek exit would also spark uncertainty in the Eurozone economy that has almost ground to a halt, and could exact a very high price.
"The biggest worry is about a financial stampede" to get out of Europe, said Thomas Grjebine, an economist at the CEPII international economics institute.
"If investors are not reassured that the Eurozone is really solid there could be an increase in interest rates, which are currently very low, and thus borrowing costs," he said.
Analysts fear that rising costs of credit and falling investment would seriously undermine efforts to revive Eurozone growth.