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Greece euro exit 'could trigger collapse of currency'

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Greece euro exit 'could trigger collapse of currency'

The euro could collapse if Greece is forced to pull out, experts have warned.

According to the Institute for Public Policy Research, the country's exit from the single European currency would not be enough to bring about an immediate collapse by itself.

However, chief economist Tony Dolphin believes it could potentially start a chain reaction across the continent, with more nations pulling out of the euro further down the line.

"I think the danger is that it starts a domino effect which affects mainly Portugal and Spain and then Italy," he commented.

Nevertheless, Mr Dolphin is predicting that the major European economies will "do anything they can to hold it together". As a result, he is confident Greece will remain in the euro in the short-term at least, before leaving at a later date.

"I think the level of austerity that is being forced on it within the currency will just become too painful ultimately," Mr Dolphin said.

He warned that if Greece is forced to pull out of the euro, the consequences could be far-reaching. For instance, he predicted that it could have a large effect on Britain's economy, which might lead to the current recession getting worse.

Mr Dolphin said this is because Greece's exit from the single currency would bring about a crash in the European banking system.

Therefore, Britain's ability to raise funds would be adversely affected, while consumer confidence would suffer as well.

Mr Dolphin added that the economy in Britain may also be hit because businesses would become reluctant to invest and recruit more staff.

This comes after prime minister David Cameron warned that the ongoing debt crisis in the eurozone is affecting many countries that are not part of the monetary union, including the UK, the US, Japan and Canada.

He has called on world leaders to take urgent action to tackle the situation and to put contingency plans in place.

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