Charles Dallara, Managing Director of the Institute of International Finance (IIF) has warned that the cost of a Greek exit from the euro could exceed $1.25 trillion and that an exit would result in the European Central Bank's (ECB) insolvency.
Bloomberg reported Dallara painted a bleak scenario of ECB insolvency and a dire risk of contagion to the other vulnerable European economies of Spain, Portugal, Italy and Ireland if Greece were to exit the euro in a disorderly default. He urged that Greece's economy should be aided at all costs to avoid the one million euro costs of exit.
Dallara suggested an additional 10 billion euros to aid Greece, saying “We’re talking about very modest sums compared to what’s already on the table. A small olive branch here carefully defined, nuanced in its presentation, not as an alternative to fundamental reform but a recognition that some elements of this program were not that well designed."
The Greek press has upped the reportage of black scenarios Greece could face if it leaves the euro, citing food and oil shortages, no access to medicines and mass unemployment. SF Gate reported New Democracy leader Anthonis Samaras warned "No society, no economy and no democracy can tolerate such a sudden collapse in so little time."
The latest election polls from Greece, published on May 27, show that pro-bailout party New Democracy has taken the lead from the radical coalition of the extreme left, SYRIZA, which is campaigning on an anti-austerity platform. However, there is the possibility that incendiary remarks from the head of the International Monetary Fund (IMF) Christine Lagarde which insulted the Greek people, could draw support back to SYRIZA as a backlash against the IMF program.
Dallara advised “Those who think that Europe, and more broadly the global economy, are really prepared for a Greek exit should think again."