5 Reasons Why Greece Could Leave the Euro-Zone After the

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Greece could leave the euro-zone after the US elections. This speculation isn’t necessarily related to the report that Europe wants to help Obama get re-elected. There are quite a few other reasons that support a Grexit in upcoming weeks – some are directly related to the elections, and other are just related to the timing.

Here are 5 reasons why Greece could exit the euro-zone quite soon:

  1. Coordination: Let’s start with the elections: a Greek exit of the euro-zone is a huge event, despite Greece’s small size. It sets a precedent for a country leaving the euro-zone, and will likely result in losses on money lent to Greece.
    The shock waves from such a big event will be felt all around the world, including the world’s No. 1 economy: the US. A Grexit has implications for US banks and for the US economy. It is impossible to believe that EU leaders would not coordinate such a move with the US, a close ally. In addition, the US is also invested in Greece via the IMF.
    In order to better coordinate this move, leaders in Europe need to know who will be the next occupant of the White House. This doesn’t necessarily mean that the policy on Greece and the EU would be different under Obama or Romney – only that Europe needs to know who to work with. And now they know: Update: Obama is re-elected – EUR/USD jumps towards resistance – will the dollar continue weakening, or could this turn around?
  2. Endless delays: So far, many tentative deadlines for reaching a deal: a Eurogroup meeting on October 8th, an EU Summit on October 18-19th and quite a few Eurogroup or EWG meetings have failed. The latest report is that a Greek bailout deal is not expected at the summit on November 12th. It looks like there are problems cutting a deal, but it could also be a deliberate delay.
    It’s important to remember that Greece is set to run out of money soon: According to some reports, the date is November 16th, and according to others, it is the end of November. These deadlines are not exact – in the past, Greece discovered it could actually take more time. Nevertheless, there is no doubt that the country is running out of money without the next tranche of aid worth 31.5 billion euros.
  3. End of the autumn: the head of the Eurogroup, Jean-Claude Juncker, said that he sees Greece staying in the euro-zone “at least until the end of the autumn, and after that, too”. That was in the hot days of August. We are closer to the end of the autumn now. This ominous statement will be tested soon.
  4. Greece reaching its limits: the troika wants Greece to pass labor reforms, that some coalition members reject. Even if the laws pass the vote in the Greek parliament on Wednesday (when there is a general strike), the government is losing support. In addition, a Greek court said that these reforms may be unconstitutional. If they really are, is there time to change the constitution? Or time to find another solution?
  5. Germany reaching its limits: The IMF reached a conclusion that for Greece to reach its targets, another debt restructuring is needed, and this time, for the official sector (OSI), that holds most of Greece’s debt. This means that euro-zone governments will have to take a loss on their loans to Greece. How will that go down in Germany? Not so good. Germany’s ability to extend and pretend is also reaching its limits.

What do you think? Could Greece leave the euro-zone soon? Or will we see another can kicking exercise?

Further reading:  How to trade the Grexit with EUR/USD.

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About Author

Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.

48 Comments

  1. I don’t know if Greece will leave the euro zone this year, but I do know that it’s bound to happen sooner rather than later. Ever since the current crisis started the governments and central banks have been doing nothing to address the roots of the problem, which means to restructure the whole economic model completely. All they’ve done is to keep on throwing buckets of money into the fire, i.e. doing the very same thing that brought the crisis about in the first place. They can continue doing it for quite a while, no doubt, and keep things muted. But as long as the roots of the crisis remain neglected, this crisis is not going to go anywhere, and it’s bound to break out again and again. My own guess is that the powers that be don’t have a clue as to how to even begin dealing with the situation in earnest. Their minds are hopelessly stuck in the past and have no fresh thoughts for the future.

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  3. Elam; I have always resected your prediction and followed it always; but in this one you are dead wrong … do you know the impact of of greece exit to EU and US at large? Common, let’s be real here and stop being so faky in our speculation: beside your reasons for Greek exist are baseless … US is strongly behind Greece remaining in Europe so I don’t know where you got this info from

    • You wrote: “US is strongly behind Greece remaining in Europe”. It´s true but not for financial reasons. Some private discussions from which leakeage are very few, refer the needs to prevent Greece to fall under Russia influence. Geo-politics at it’s best!

      • Geo politics certainly plays a role here. That could have helped Greece so far. But the US could have more influence over Greece if the country leaves the euro-zone, and not let it become influenced by Russia, like Cyprus is.

        • Agree. In this case the U.S. has to cover the Russian offer of financial support. Here the geo-politics also has to do with the unexplored big oil reserves.

  4. Well you have a point there, of course they are relying on the help from the US and the Euro zone directly and indirectly through the IMF, the waiting might be a luxury they don’t have, although one would be surprised by the size of the delays Greece’s own political parties and coalition might inflict on the issue.

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  17. I think we’re going to see more can kicking and uncertainty. The greeks will keep lying and the pussies in Europe will give them more money. It will take a significantly more dire situation for either part to have some courage.

    • Can kicking can certainly happen. However, the blame for the crisis doesn’t fall only on Greece – the EU gave the very detailed austerity measures, but doesn’t care at all about corruption. This doesn’t look good.

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  21. I don’t think, US and Euro leaders are yet ready to take the financial loss immediately by the Grekxit, rather than giving another chance to Greece and sort out a way to resolve the issue…So, the Greek exit might not happen within 2/3 months at least…..

    And about the Geo-Political issue, permanent chance can be taken by the US and Euro leaders even now. So, it might not be the most important issue right now…

  22. I guess everybody have a good reason to say about Grexit,mostly because the fact on Greece economy. This is my thought about Greece: Probably the best way (or probably worst to be the best way) is letting the Greece out of the EZ. Certainly it will have deepest impact on global economy,not only EZ. But it just like a man with a serious illnesses,which makes the man to chose he would like to have his legg to be cut off or he choose to keep his legg but with a lot of ‘term and conditions’ from the doctors. Offcourse,when he decide to cut his legg to cut off the effect of his illness from hovering around his body (and in fact could make him death),the 1st impact is gonna be on his phsycollogy..very sad..and the functionnof his body become ‘unavailable’ for some times. But the good is,after the cut off,and serious theraphy,he will find himself to be healthy and can act as if he is a normal person. Well,it’s my assumption about what will happen if Greece definitely exit or kicked-out. The eur (generally the global economy) will fall to the deepest or the worst level,till all the world leader comes with the ‘serious medicines’ to take the economy back to normal (or new normal) condition. Ofcourse,every choice have a lot of consequences and also a huge sacrifice.

  23. I think Greece must leave eurozone, but it will not happen just now. Maybe one more bailout and waiting for US fiscal cliff resolution?

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  27. Lohrasb Amjadi on

    By injecting funds into the failing Greek economy, the EU has simply been postponing the inevitable! Poorer European Economies such as Greek, Portugal, and Spain which rely on tourism for the bulk of their income should have never converted to a currency which was meant to be a successor to the Deutschmark!

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