European officials have secretly been working on a plan for the worst-case scenario that at this point, seems possible: a Greek exit from the Euro. German chancellor, Angela Merkel, said earlier this week that she didn’t want Greece to leave. But with fresh Greek elections set for mid-June, elections that have already been dubbed as a major showdown between Greece and the rest of Europe, anything could happen.

Widespread reports this week have shown that the Greeks have been removing money from banks, up to 800 million euros a day.

There was also a newspaper report that indicated that a Spanish bank had one billion euros withdrawn from it amidst fears that parts of Europe are in serious financial trouble, including some major Spanish banks.

Spanish officials quickly moved to quell speculation, and denied the report, but the partly nationalised lender, Bankia, saw its share price slump 30 per cent as a result yesterday.

This is the kind of thing that happens when there is financial panic.

Now, for the first time, EU trade commissioner, Karel De Gucht, has said that the European Commission and the European Central Bank are working on scenarios in case Greece has to suddenly leave the euro zone.

The first Greek parliamentary elections delivered a fragmented result that highlighted growing public opposition to austerity measures, and Greeks have overwhelmingly protested for years against such measures.

De Gucht told Belgium’s Dutch-language newspaper De Standaard, referring to the threat of Greece leaving the euro:

A year and a half ago there maybe was a risk of a domino effect. But today there are in the European Central Bank, as well as in the Commission, services working on emergency scenarios if Greece shouldn’t make it. A Greek exit does not mean the end of the euro, as some claim.

Greeks will go to the polls again on June 17. A victory by the far-left, anti-bailout coalition Syriza – which has pledged to tear up the bailout agreement – could be likely – and would increase the possibility of the country leaving the euro.

The prospect of Syriza winning the election has sent the euro and markets across the continent tumbling this week.

De Gucht didn’t think Greece would leave the euro zone, but the crucial question was what conditions the ECB would set for guaranteeing the liquidity of Greek banks.

The endgame has begun, and how it will finish I do not know. The question is can everyone maintain their sangfroid over the coming weeks.

A European Commission spokesperson earlier this week said:

There are many, many questions arising and many questions open about Greece and most answers have to come from Greece and we have to respect the ongoing political process. Clearly, the future of Greece is in the euro zone. We are working on that.

Still, anything could happen, and either way, the knock-on effects will be felt worldwide for years to come.

[Source: TheTelegraph]