Greece would face 'major recession' if deal isn't reached
The European Bank of Reconstruction and Development has also warned that Greece would be plunged into a major recession if it defaulted on its debts, hurting economies across Eastern Europe.
The baseline assumption in today’s EBRD report is that an agreement will be reached between Greece and the lending institutions,.
That would helping confidence and stability and could pave the way for a return to modest growth in the second half of the year, pulling Greece out of recession. Growth could then rise to 2% in 2016, as improved confidence and the ECB’s QE programme kick in.
However...
these forecasts would be rendered completely invalid in a negative scenario of missed sovereign debt payments, capital controls, limits on deposit withdrawals and the possible introduction of IOUs (“pseudo euros”) or equivalent instruments to pay domestic obligations.
In this case, Greece would likely fall back to a major recession, the size and duration of which are difficult to quantify now.
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