What is a Grexit and why does Bloomberg Businessweek say we should fear it?

We are three weeks away from the Greek general election, which the left-wing Syriza party, which wants an end to Greece’s punishing austerity regime, seems likely to win, says Megan McArdle at Bloomberg The problem is that the austerity regime is the condition for continued assistance from the euro zone. If Syriza does indeed win and tries to make good on its promises, Greece could be forced to exit the euro.

The mechanics of a Grexit are beyond daunting. The financial system will have to be frozen in order to keep people from immediately withdrawing all their euros and attempting to find them safe harbor abroad.

The contagion may well spread beyond Greece; Ireland seems to have escaped the trap, but Italy, Portugal, and Spain all remain vulnerable.

The ECB will announce its QE programme, designed to steady the Euro economies, on January 22. The Greek election is January 25th. Stay tuned!

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