Greek GDP would fall by 20 per cent after Grexit says S&P

James Nickerson
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If Greece votes "No" and leaves the Euro its GDP could fall sharply (Source: Getty)

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.

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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.

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