IIF managing director warns of potential political ramifications of Greek exit
An exit from the Eurozone by Greece would place the "whole cohesion of the western alliance in doubt", the executive managing director of the Institute of International Finance (IIF) has warned.
Hung Tran, who helped to secure the 2012 haircut to Greece's debt, said the potential fall out from a Greek exit is "not fully understood" and predicted the consequences for the 19-nation bloc would be far-reaching.
Despite his cautioning, Tran continues to believe there is still "room for compromise" and believes the country could strike a "last minute deal".
He was quoted in the Telegraph as saying: "In the short term, it probably is the case that financial contagion in terms of spreading to borrowing costs of peripheral countries like Spain and Portugal would be more limited this time compared with 2010 or 2012. However, there’s a whole range of political ramifications in terms of market expectations if the euro proves to be reversible. The natural question is: who will be next?
"If Greece exiting the euro area severely strains its relationship with the EU and the West, questions will arise about the alignment of Greece in terms of foreign policy, security policy and so on, and the whole cohesion of the western alliance would be put in doubt."
He continued: "There has been a sharp polarisation both on the right and left of the mainstream arguing that the current austerity driven approach of economic policy hasn’t worked [...] so the failure of reaching an agreement in Greece leading to an exit from the Eurozone would make this debate and this polarisation sharper and more problematic."