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British economists have urged Greece to default on its €300 billion (£255 billion) debt in order to save the nation's economy. Greece is essentially being told to drop the euro.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports, according to a Times Online report.
Should Greece choose to do so, experts believe other nations could quickly follow.
Intrade.com had begun to offer odds on Greece, Portugal, Spain, Ireland or Italy defaulting before the end of this year. As of press time May 31, 2010, there were no takers on this particular trade.
Greece's departure from the euro would prove disastrous for German and French banks, to which it owes billions of euros, the Times reports.
Doug McWilliams, chief executive of the CEBR, said: "Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.
"So part of the package of leaving the euro must be to convert the debt into the new domestic currency unilaterally."
McWilliams called the move "virtually inevitable" and said other members may follow.
"The only question is the timing," he said. "The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is less serious.
"Could this be the last weekend of the single currency? Quite possibly, yes."
Wall Street was closed Monday due to the Memorial Day holiday in the US so it remains to be seen how the markets might react to these fears in the coming days.
Aaron Goldstein, Gambling911.com
