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Greek exit from eurozone seeming more likely

A man reads newspaper headlines in Athens on May 14, 2012. Greece on Monday faced the prospect of fresh polls after political parties failed to narrow divisions over a painful EU-IMF bailout deal, with few expecting progress at talks to form a government.

Jeremy Hobson: The political parties are still trying to form a new government in Greece, more than a week after the elections there left a split decision. And the prospect of a new round of elections is also boosting the chances of a Greek exit from the euro.

For more, let's go live to Marketplace's Stephen Beard at our European Desk in London. Stephen, what is going on in Athens?

Stephen Beard: Still a stalemate, and the key problem is that Syriza, the left-wing group that came second in last week's election, is opposed to the austerity measures that were agreed in return for the last bailout, and Syriza refuses to form a government with the pro-bailout party. So that means, as you say, we could see another election next month, and Syriza looks as if it might then get even more votes.

Hobson: And Syriza is against bailouts, it's against austerity, so if Syriza wins the next round of elections, I assume that's not going to be great news for the future of the euro, or Greece's role in it.

Beard: No, because Syriza wants to renegotiate the terms of the bailout -- that would be in defiance of the European Commission, the European Central Bank and the Germans, and that would make Greece's role in the eurozone untenable, as independent economist Peter Westaway told the BBC.

Peter Westaway: I think the idea that they're going to be able to seriously renegotiate those terms and stay within the monetary union is slightly fanciful. There's a real possibility that they will have to leave the monetary union.

Hobson: And Stephen, that's something we're hearing more and more of, and I wonder: Is anyone planning for that possibility?

Beard: Well in fact, there's a leaked document from the German finance ministry which purports to show that Germany is preparing for a Greek exit. Now, this leak may be a ploy to put the pressure on the Greeks, but it would be, in this climate, extraordinary if governments and companies were not preparing for Greece to leave the euro.

Hobson: Marketplace's Stephen Beard in London. Thank you, Stephen.

Beard: OK Jeremy.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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Greece is just the canary in the coal mine. It's an early indicator of what is to come to other overly indebted western countries. And it isn't so much a contageon in that the canary itself would injure otherwise healthy economies, it more that the canary allowing people to understand the realities of where we are. More like "letting the cat out of the bag" so now everyone knows the truth.

Greece is the prototype. This will happen to the US, eventually, if we don't stop our deficit spending.

Not really. But, had Shrub not blown the budget to bits on the revenue side and started two wars without paying for them, we wouldn't have the problem to the degree we do.

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