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Europe 'teetering on brink of the unthinkable'

Europe 'teetering on brink of the unthinkable'

The possibility of a country pulling out of the euro has been described as an "unthinkable" scenario for Europe.

According to foreign exchange specialist HiFX, the continent is currently teetering "on the edge" of this situation as uncertainty surrounding Greece's financial future remains.

The outcome of the country's recent election was indecisive, while subsequent talks on putting together a coalition government came to nothing, which means voters will have to go to the polls again next month.

Andy Scott, premier account manager at HiFX, stated that while the consequences of the country's exit have been "well documented", nobody can predict all of the likely outcomes that would arise if it does happen.

"With so many banks and arguably at least a few sovereigns in very poor financial health, such an event could have disastrous consequences," he commented.

President of the European Council Herman Van Rompuy has this week said Europe wants Greece to remain part of the eurozone but stressed it must respect its commitments. However, the country's political parties are divided over how to tackle the financial crisis, which means the upcoming election will be crucial in determining its future.

"The eurozone has shown considerable solidarity having already disbursed, together with the IMF (International Monetary Fund) nearly €150 billion (£120 billion) in support of Greece since 2010," he stated.

Mr Scott added that the eurozone crisis has led to the dollar becoming the "currency of choice for fearful investors", as it has gained approximately four per cent against other major currencies in the last month. He noted that since a solution to the problems in Europe does not seem to be forthcoming, the dollar is likely to keep making gains and remain a safe bet.

This comes after Tony Dolphin of the Institute for Public Policy Research warned that Greece's exit from the euro could start a chain reaction across Europe, with countries such as Portugal, Spain and Italy potentially pulling out.

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