With Greece shutting its banks and imposing capital controls ahead of Sunday's national referendum on the externally-imposed austerity regime, the endgame of its struggle with creditors seems near.
The question now is not so much what will happen to Greece’s economy if it abandons the euro and more to do with the effect on world markets.
The impact of Greek politicians’ decisions has already spread well beyond its borders, with European bank shares falling sharply yesterday. Major lenders in Italy, Spain and France were at the forefront, losing up to 7 per cent of their value in early trading, but with most eurozone bank stocks falling across the board.
However, as The National reported yesterday, the potential effect of the so-called Grexit will be felt globally. A report by the Bank for International Settlements warned that after a decade of mostly robust growth in emerging market economies, there is now an increased vulnerability to crises.
The Swiss-based organisation, described as a central bank for central banks, highlighted parallels between the economic conditions today and those that existed before the Latin American debt defaults in 1982 and the Asian economic crisis of 1997.
One of the popular aphorisms about finance is that markets hate uncertainty – and it would be uncharted territory if Greece became the first country to abandon the euro.
One effect of uncertainty is that banks factor in a wider range of potential outcomes, manifested in an increased cost of lending.
This is felt most by emerging economies and is exacerbated by the amount of debt worldwide that has increased to almost unquantifiable levels since the crash of 2008.
Among the developed economics, which have barely returned to historic levels of growth, any kind of stumble created by the Greek crisis will be difficult to counter.
Their central banks have pretty well exhausted the ammunition available to them trying to recover from 2008. Greece might be nearing its endgame but for economies around the world, a new period of uncertainty has just begun.
