Europe’s financial crisis lurched into a perilous new phase as dire predictions emerged of a collapse in Greece’s economy, with a run on its banks bringing an inevitable end to its membership of the euro.

As leaders in Athens accepted the need for a new general election to end a national stalemate, the International Monetary Fund said Europe’s leaders should prepare for the possibility of a Greek departure from the single currency.

Christine Lagarde, head of the IMF, warned she was “technically prepared for anything” and said the utmost effort must be made to ensure any Greek exit was orderly. The effect was likely to be “quite messy” with risks to growth, trade and financial markets. “It is something that would be extremely expensive and would pose great risks but it is part of options that we must technically consider,” she said.

Raising tensions still further, Germany warned Greek voters that the wrong result in next month’s election will force their country out of the single currency.

Greece’s president warned, perhaps most alarmingly, that its banks risk running out of money, posing a “threat to our national existence”.

Karolos Papoulias, the Greek president, warned party leaders that their continued failure to agree was risking “fatal consequences”. Citing a secret government document, he said Greeks were already pulling £80 million a day out of the country’s banks. Almost €1 billion (£795 million) has been withdrawn since the last elections on May 6.

“The extension of political instability will lead to fatal consequences. The absence of government is a serious risk to the financial security of the Greek people and our national existence,” the president was reported as saying.

Mr Papoulias said he had been warned by the central bank and finance ministry that the country faced “the risk of a collapse of the banking system if withdrawals of deposits from banks continue due to the insecurity of the citizens generated by the political situation”.

Some economists have suggested that a euro exit could be done in an orderly way by closing Greek banks while the country prepares to reissue the drachma. Costas Simitis, a former prime minister, said that would spark panic, warning that Greeks would rush to withdraw money from banks. “If they close more than three days there will be a bank run,” he said. A report in Germany’s Wirtschaft Woche magazine forecast that a Greek bankruptcy and exit from the euro would cost the governments of the single currency’s 17 members £240 billion, pushing the eurozone and European economy into a crisis not seen since the 1930s.

Originally posted by faryjay
reply to post by Somethingintheclouds

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In my honest opinion, Europe's cities were better off with their own individual currencies, Only God knows why they all took on the Euro!

Originally posted by BiggerPicture
oops,

forgot the us-worse-than-greece figures:

YouTube Link

Originally posted by faryjay
reply to post by Somethingintheclouds

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In my honest opinion, Europe's cities were better off with their own individual currencies, Only God knows why they all took on the Euro!

Originally posted by Somethingintheclouds
reply to post by surrealist

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I saw this on the news here in the UK glad we did not go for the euro the whole of Europe is #ed!