Central banks the world over are preparing for the economic consequence of Greek’s June 17 elections. The elections will either make or break the country’s membership in the eurozone. If it exits, many expect a whiplash market reaction and possible public turmoil.
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G20 nation officials, at a meeting last week in Mexico, announced that their central banks are at the ready to take action against any negative consequences that result from Sunday’s election.
Mervyn King, Governor of the Bank of England, says Britain will inject large quantities of cash to get its economy moving, if need be. He also stresses the severity of the situation:
“The other effect of the euro area crisis has been to create a large black cloud of uncertainty hanging over not only the euro area but our economy too and indeed the world economy as a whole.”
Mario Draghi, as well, is poised to counterbalance:
“The ECB has the crucial role of providing liquidity to sound bank counterparties in return for adequate collateral. This is what we have done throughout the crisis, faithful to our mandate of maintaining price stability over the medium term. And this is what we will continue to do.”
In the end, says Jim Bianco, of Bianco Research, the greatest threat facing the eurozone upon a Greek exit is a domino effect:
“If Greece is out of the euro then we start the game… When does Spain leave, when does Portugal leave? And it just snowballs in. It doesn’t end with Greece – it would only begin with Greece.”