ATHENS May 29 If Greece left the euro, living
standards would plummet, incomes would be slashed by more than
half, and inflation and unemployment would skyrocket, the
National Bank of Greece warned on Tuesday.
In a report released ahead of an election on June 17 that
may determine whether the country stays in the single currency,
the country's biggest bank said the risk of Athens exiting the
euro was no longer just a theoretical possibility, warning that
the fallout from such a move would be dramatic.
"An exit from the euro would lead to a significant decline
in the living standards of Greek citizens," the NBG wrote ahead
of a vote which parties opposed to austerity measures that have
kept Greece in the euro so far have a chance of winning.
The bank said per capita income would collapse by at least
55 percent, the new national currency would depreciate by 65
percent against the euro and a recession, now in its fifth year,
would deepen by 22 percent.
Painting a dire picture of post-euro Greece, it added that
unemployment would jump to 34 percent of the work force from
around 22 percent now and that inflation would rise to 30
percent from its current level of 2 percent.
The NBG is due to report its first quarter earnings on
Wednesday and is expected to announce a loss. Greek banks,
including NBG, have hemorrhaged deposits since the crisis began
and are perceived to be in favour of retaining the euro because
the alternative might trigger a run on their reserves.
The NBG said it wanted to contribute to dialogue about
Greece's future with respect to the euro.
Greece had to call a repeat election for June 17 after an
inconclusive vote on May 6 left the parliament divided between
parties that support and oppose the austerity steps that were a
precondition of a second 130-billion-euro bailout agreed with
the European Union and International Monetary Fund in March.
Tax rises and spending cuts insisted upon by the EU and IMF
in order to save the country from default have caused a wave of
corporate closures and bankruptcies, sparking angry protests
that have often turned violent. More than half of Greeks aged
15-24 are unemployed, according to the latest figures.
While most Greeks want to keep the euro, about two thirds
are against the deep salary, pension and job cuts that come with
continued membership of the single currency, according to the
latest opinion polls.
Greece's conservatives have regained a tentative opinion
poll lead that suggests they may be able to form a pro-bailout
government committed to keeping the country in the euro. But the
vote is still deemed too close to call.
EU leaders have warned Greece of the consequences of
renouncing the bailout, saying they will pull the plug on
funding, leading to rapid bankruptcy and an ignominious exit
from the single currency.
Athens has agreed additional spending cuts of 5.5 percent of
GDP, worth about 11 billion euros in 2013-2014, and has told its
lenders it will raise another 3 billion euros from better tax
collection methods in order to continue receiving bailout money.