Financial experts are watching the Greek default closely, as a sign of future financial Armageddon in Europe to come. It was thought that an agreement had been reached up until Greece decided it might have a referendum on the measures to help bailout the country. That sent shockwaves throughout the Eurozone at the thought that monetary policy might be held hostage by future referendums in Spain and Italy, also, which are up next. Luckily, the referendum was canceled and stability of future financial planning placed back on surer footing, with the consequences of a failed euro bailout clear for everyone to see.

Eurozone Map (2009) Image via Wikipedia

What a Greek Default Means

If Greece were allowed to leave the Eurozone due to its massive debts, then the drachma would be automatically reinstituted as the official currency. That currency would be highly devalued against the Euro and the debts owed would be supersized in comparison to the value of the official currency. If Greece leaves the Eurozone, then it would automatically default on its debts. This would mean that it would not be able to pay any governmental pensions or salaries, and runs on the banks would ensue. Austerity measures have already caused significant rioting in the streets, and further financial chaos would likely result in increased violence on the streets, if not outright civil war. It is becoming very apparent that is far easier to join the Eurozone than it is to leave it unscathed for those countries that are facing severe economic troubles, like Greece, Italy, and Spain.

Spain and Italy Next

Saving Greece is not just for the benefit of Greek society, it also is necessary to keep the Eurozone stable. Italy and Spain also face similar economic issues and will most likely also need a bailout. Failing to keep the euro solvent won’t just mean the demise of Greece; it can be the first domino that causes all the rest to fall, too. For that reason, the European Central Bank and the International Monetary Fund want to see a quick and relatively painless resolution to Greece’s economic woes. This may mean that they take 50 percent losses on Greek bonds, but it is far better than no return at all and the subsequent dissolution of the European Union all together. As far as the European Union is concerned, everyone is in this mess together. Either they all learn to live together and resolve their debts or no one gets out alive.