Grexit would leave Greece a failed state says former US Treasury secretary Larry Summers
Greece will likely become a failed state if it leaves the Euro, according to a former US treasury secretary.
Writing in the Financial Times, Lawrence (Larry) Summers said it now “appeared likely” that Greece would financially separate from Europe, and that this would be the least beneficial result for both parties.
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Make no mistake about the consequence of a breakdown. With an end to European support and consequent bank closures and credit problems, austerity in Greece will get far worse than it is today and it will probably become a failed state to the great detriment of all its people and their leadership.
Summers outlined the situation in terms akin to the so-called prisoner’s dilemma – a situation where both sides would benefit most from the other’s collapse, but more from than accord than a mutual rejection of terms.
Both sides are holding out for their best terms, but in an attempt to win big may end up losing big. Greece’s already battered economy would suffer further, while the EU would likely need to deal with Greek economic refugees leaving their homes in search of work. What is more, a Russian presence in Greece wouldn’t be high on Europe’s list of desired outcomes.
Summers’s comments were echoed by the head of Greece’s biggest Bank. Louka Katseli, chair of the National Bank of Greece, told the BBC that both sides would be “insane” not to come to a deal.