Rating agency Standard and Poor’s (S&P) has warned that without the support of Europe, Greece’s banks and payment system would be unable to operate and consequently shut down.
The rating agency said "Eurosystem support" is estimated at 70 per cent of GDP - thus, Greece’s real GDP would fall 20 per cent below the baseline within four years if the country left the Eurozone.
A new Greek currency – probably the Drachma – would depreciate against the euro, causing the value of euro-denominated public and private sector debt to balloon, exacerbating the situation, S&P said.
It is becoming ever more likely that Greece may vote "No" in Sunday’s referendum on whether to accept creditors’ demands, which could pre-empt a Greek exit from the eurozone. In this situation, the rest of the Eurozone would be relatively insulated, according to S&P.
A larger risk is that a Grexit could hurt capital markets and drive up yields, particularly for the more fiscally vulnerable peripheral countries such as Spain, Italy and Portugal.