The worst-case scenario envisions governments defaulting on their debts, a run on European banks and a worldwide credit crunch reminiscent of the financial crisis in the fall of 2008.
A Greek election on Sunday will go a long way toward determining whether it happens. Syriza, a party opposed to the restrictions placed on Greece in exchange for a bailout from European neighbors, could do well.
They think the path of a full-blown crisis would start in Greece, quickly move to the rest of Europe and then hit the U.S. Stocks and oil would plunge, the euro would sink against the U.S. dollar, and big banks would uncover losses on complex trades
Greece and European Banks
What would Greece's exit look like? In the worst-case scenario, it starts off messy.
The government resurrects the Greek currency, the drachma, and says each drachma equals one euro. But currency markets would treat it differently. Banks' foreign-exchange experts expect the drachma would plunge to half the value of the euro soon after its debut.
For Greeks, that would likely mean surging inflation — 35 percent in the first year, according to some estimates. The country is a net importer, and would have to pay more for oil, medical equipment and anything else coming from abroad.
European banks would take a direct blow. They've managed to shed much of their Greek debt but still held $65 billion, mainly in loans to Greek corporations, at the end of last year, according to an analysis by Nomura, a financial services company. French banks have the most to lose.
The Firewall to Portugal, Spain and Italy
The European Central Bank and European Union would have to persuade bond investors that they will keep Portugal, Spain and Italy from following Greece out the door. Otherwise borrowing costs for those countries would shoot higher.
"If they fail to reassure bond investors, all of the nightmare scenarios come into play," says Robert Shapiro, a former U.S. undersecretary of commerce in the Clinton administration.
Experts agree that the so-called firewall built to stop the crisis from spreading needs more firepower.
Much of the €248 billion ($310 billion) left in the European Financial Stability Facility, one European bailout fund, was pledged by the same countries that may wind up needing it, Vamvakidis says.
There's also a European Stability Mechanism that's supposed to be up and running next month, but Germany has yet to sign off on it.
If there is a run on the banks of those other european countries, then Banks could fail, the surviving banks could stop lending to each other, and a credit freeze could shut down Europe as assuredly as a blizzard did last winter.
One way to stem the contagion would be to create so-called eurobonds — bonds backed by all 17 euro countries. They could be sold to raise money for troubled European governments.
Germany, which has the strongest economy of the euro countries, has slowly warmed to the idea but wants weak governments to fix their finances first.
So, what's the good news? It's hard to find anybody who believes the crisis will get that far.
The bankers planning for a Greek exit say they think European leaders will get scared into action. The Federal Reserve and other central banks learned from the financial crisis in 2008, they believe, and will jump in to stop the nightmare scenario from unfolding.
Just in case the worst comes to pass, analysts at Barclay's have attempted to estimate the fallout. They compare it to the days after the investment bank Lehman Brothers collapsed in September 2008. This time, they project that oil prices would fall to $50, stock markets outside of Europe would plunge 30 percent, and the dollar would soar to trade nearly even with the euro.
Blythe is skeptical that it will get this bad, because he hopes the previous financial crisis has left governments and central banks prepared.
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