Imagine you woke up one morning and the life savings you'd been squirrelling away in the bank for decades was worth half as much as it was a day earlier.
That's a very real possibility for Greeks as the country moves towards a default on its debt and potentially calamitous exit from the euro zone - or what's been dubbed a Grexit in financial markets.
The country is due to repay 1.6 billion euros ($A2.34 billion) to the International Monetary Fund by early Wednesday morning Australian time but is likely to miss that deadline after Greek Prime Minister Alexis Tsipras rejected a last-minute compromise deal from creditors.
Instead, Mr Tsipras has called a referendum for Sunday on whether to accept further austerity measures sought by the European Union and IMF.
If Greeks vote against the package, the country could be forced to leave the euro zone.
Prominent economist Saul Eslake says that would be a disaster because the country would have to quickly move to reintroduce its traditional currency, the drachma, which would probably be worth around half that of the euro.
"That would mean people who have nominal assets like bank deposits, half their wealth is wiped out," he said.
Unsurprisingly, Greeks have been emptying their bank accounts for months, with about five billion euros ($A7.32 billion) reportedly withdrawn in May alone.
The government has been forced to shut banks for at least a week and restrict personal ATM withdrawals to 60 euros ($A87.83) a day to stop the financial system from collapsing.
But for a country whose economy has been shrinking for more than six painful years and where unemployment stands at around 26 per cent, some question whether getting out of the euro is the best option.
UNSW economist Tim Harcourt said while the fall in the currency would be painful, it may help lift the economy by making it cheaper to holiday and produce goods there.
"There would be a short-term shock but it could actually be quite good for Greece, it would suddenly become a very low cost place and that would be good for its shipping and tourism," he said.
Still, most economists expect the parties to reach some sort of compromise and opinion polls have consistently shown most Greeks want to stay in the euro.
But even if the Grexit went ahead, the fallout is not likely to lead to a major financial crisis because the country's debt is owed to official institutions rather than the private sector.
And while there are fears Greece's departure could prompt other countries to follow suit, the euro zone's more trouble-prone economies like Italy and Spain are in better shape than a few years ago.
Share
