The idea of a Greek or Spanish exit from the euro zone, once viewed as an extreme worst-case scenario given credence only by the most bearish, is increasingly becoming part of the mainstream.
While most policymakers, analysts and economists still shudder at the thought of a Greek exit – or Grexit as it has been called – more and more are running through scenarios for this situation. Greece’s elections on June 17 are too close to call, and the election of an anti-bailout party could hasten its departure from the single currency.
The immediate concern for the markets is how the euro would be affected in currency markets, and how that would affect the core countries left in the currency.
The euro without peripheral Southern European countries would rise to around 1.50/1.60 against the dollar, according to Neil Dwane, chief investment officer, Europe, at RCM. He argued that Germany would be able to deal with this hike in the value of the currency.
“If they (the Germans) thought we would get that, they would simply rearrange their business on a two year plan to be more competitive, take lower wages for a while. That’s why they don’t see why Spain and Greece can’t get on with it,” he told CNBC’s “ Squawk Box Europe .”
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