Greek bank run and Eurozone collapse – How it could affect you

Symbol of the Euro in Frankfurt

The trouble in the Eurozone has been brewing for a few years now but with no solution in sight. Prices of commodities have gone up, shares have fallen, jobs have disappeared and many Europeans are living in uncertainty and many in poverty.

As the crisis increases, Greeks ran to their banks to withdraw $894m (£590m) from their
accounts on Monday in anticipation of Greece's switch to the drachma from the euro and the devaluation that is almost certain to follow. Over the past six months, Greeks cleared £900billion (£600bn) from their accounts leaving the country’s coffers almost.

There are many different people having different opinions on capital control and bank runs, how the European banking system will blow up next, or how much the new currency of Greece, the Drachma will fall and vis-à-vis the Euro.

What is clear is that the Eurozone is going to suffer financially for many years to come. And then, there is another question of what impact it will have to the rest of the world.  Surely it is not going to look pretty, consider that trade will probably collapse and capital will flow away from the rest of the world back into Europe. 

What the experts have said

What he said, Sir Mervyn King, Bank of England boss

The Bank of England has cut its growth forecast for this year to 0.8% from 1.2%, saying the eurozone "storm" is still the main threat to UK recovery.

The eurozone was "tearing itself apart" and the UK would not be "unscathed", said its governor Sir Mervyn King.

He also confirmed that the Bank has been making contingency plans for the break-up of the euro.The rate of inflation will remain above the government's 2% target "for the next year or so", the Bank said.

He told a news conference that the euro area posed the greatest threat to the UK recovery, and there was a "risk of a storm heading our way from the continent".

What he said, Andrew Balls, MD of Pimco Global Investments

Andrew Balls, the managing director in London of global investment firm Pimco, said it was reasonable for Sir Mervyn and other policymakers to plan for a Greek exit.

"Yes, maybe they should plan for an exit, but the thing is, speculating about it can make the event more likely, so the Europeans really do have a mess there," he told local news agencies.

"If Greece is to slide out of the euro and collapse, how are they going to protect Ireland, Portugal, Spain and Italy?"

What he said, British Prime Minister, David Cameron

Prime Minister David Cameron also spoke of the financial storm clouds across Europe, warning that eurozone leaders must act swiftly to solve its debt crisis or face the consequences of a potential break up.

He said during Prime Minister's Questions in the House of Commons: "The eurozone has to make a choice. If the eurozone wants to continue as it is, then it has got to build a proper firewall, it has got to take steps to secure the weakest members of the eurozone, or it's going to have to work out it has to go in a different direction.

What he said, Professor Ken Rogoff, Harvard and IMF Economist

Professor Ken Rogoff, the Harvard economist and former chief economist at the IMF, told BBC Radio 4 that the Greeks "are going to end up defaulting hugely no matter what", adding:  The odds that they will be gone from the euro within a few years are very high.

No country has every left the euro before and there are no provisions about how they might go about it. No one knows what the future holds.

What he said, Alan Clarke, an economist at Scotia Capital.

It's unchartered territory. Either way you look at it, it's bad. It's not a soft-option for Greece. They are spending about 8% on GDP more than they are receiving in taxes. If the population aren't happy with another 100,000 lay-offs and reject the deal, the government won't be able to borrow and pay anyone.

What happens if Greece leaves the euro?

Greece is teetering on the edge of bankruptcy and faces the growing possibility of exiting the eurozone. What would that mean?

If Greece leaves euro, it’s because the rest of the eurozone cannot bail Greece out. Europe has too much debt and no money to give away. If a country cannot pay its debts then they  become bankrupt. Europe enjoyed a flourishing export market, cheap imports from Asia and African for centuries but all that is now over. European products are too expensive for people in the eurozone and especially for the people in the developing world.

If you live in Britain or Europe or anywhere else in the world, the mess in Europe will definitely affect you somehow.  Andrew Balls, of global investment firm Pimco says, "A disorderly outcome for Greece is going to be bad for the global economy".

"What happens in the eurozone in the coming weeks and months will have an impact on the weakened global economy in terms of share, energy and commodity prices.

For the eurozone it's bad. A lot of the EU banks are exposed to Greece, the initial ESFS deal said they would lose 21% of value of holdings, now it's more like 50%. There would be 110% chance of recession if Greece goes bad.

Unlike Lehman's we've had a lot of warnings of this. It's been going on more than a year. Mervyn King has stated that contingency plans have been prepared. It would take the sting out, some of the shock factor. But we saw how the stock markets deteriorated at talk of the referendum. We've seen sharp falls in business confidence throughout Europe. Greece is small but it's the trouble maker of the eurozone. The damage it's doing to more significant countries such as Italy is immeasurable.

Around the world many banks have been exposed to Greek debt and this can cause problems globally. Just like the Greeks, there is a possibilty that banks can face a long queue of customers trying to withdraw their money all over the world.