Will Greece default and leave the euro?
IMD Professors React about the looming deadline in Greece's bailout program
June 19, 2015
Also, as an academic I would be curious to see what would happen if a Grexit did happen. These are truly unique circumstances."
Time is running out and to the extent that the Greek government has not been able to improve its relations vis-à-vis its creditors in the last few months, it is difficult to envisage a solution that could be implemented in the next few weeks.
The Greek tragedy is that exactly when the economy was showing the first signs of recovery, the new government came into power and adopted a confrontational strategy that heightened uncertainty, contributing to a loss of confidence and speculative behavior by economic agents.
In theory, one could imagine a package encompassing a more modest fiscal adjustment in 2015 and a commitment by creditors to revisit debt restructuring in the medium-term in exchange for the continuation of needed structural reforms in Greece (e.g., pension reform).
In practice, the political reality in both camps does not favor a rational solution at this stage. Market forces will soon force the hands of policy-makers and the outcome will be particularly painful for Greek society."
Nuno Fernandes, Professor of Finance and Director of Strategic Finance
"The European Commission and the European Central Bank are largely responsible for the current Greek crisis. When the situation began making waves in 2010, it could have been stopped in its tracks more easily than today.
Instead of tackling the issue then, what the EC and ECB have allowed was effectively the bailing out of banks from Northern European countries which were sizable investors in Greek debt at the time.
It would seem that today most of the Greek debt is domestic and contagion problems are smaller. But from a practical point of view, this is not true. A Grexit would mean the end of the EU as we know it. Besides of course a catastrophic economic crisis in Greece, it would have significant spill-over effects. Greece would maybe even leave NATO. This could turn into Europe's Cuban missile Crisis."
Many of these professors will all be teaching at Orchestrating Winning Performance (OWP), a unique global business program taking place next week at IMD from June 21-26, 2015.