Former Greek P.M.: 'What Happens To Greece Is A Precedent For What Could Happen To Other Countries'

The markets have feared the possibility of a Grexit (Greece exiting the European Union) for quite some time now. However, if that eventually happens, will that be as disastrous as some are making it out to be?

Former Greek Prime Minister George Papandreou was on Wall Street Week recently to answer that.

A Negative Precedent

“What we are seeing in Greece is something which I would say we might see in one form or another in many other countries that are trying to deal with a globalized economy,” Papandreou said. “The Euro Zone is partly an experiment and Europe is also an experiment of different countries, different cultures, former foes getting together, working together for a common purpose.”

He continued, “So, what happens to Greece is a precedent for what could happen to other countries. Now, some people say [there may] not be contagion, but if this fails and we have a Grexit or that could create a precedent, a negative precedent for other countries. It also creates a bitterness between countries.”

There Could Be Contagion

Papandreou was asked if he thinks the European Union will eventually disintegrate. He replied, “There are two theories about that. One is a domino theory, which will be disintegrating the Euro (union) and having contagion.”

“Some people say that that is now contained because Europe has made some important moves, we have Draghi saying whatever it takes, we have QE, we have banking union which is moving, we have more fiscal co-ordination, we have this mechanism which didn’t exist when I was prime minister, we fought it which is sort of to protect a country a country that may need a bailout.”

“There could be contagion and there would be a risk premium, most likely on other countries and I would say there will also be political fallouts,” Papandreou concluded.