| Where the eurozone crisis heads will depend not on whether Greece leaves the union, but on how the situation in the region affects debt-troubled Italy and Spain, Aleksey Bachurin, head of Russian Cash Equity Trading at Renaissance Capital, told RT. "The important thing is not Greece itself: it's relatively small and the investments in Greece are already written down by most banks. But the potential contagious effect on Italy and especially Spain -- this is a real danger," Bachurin said. Indeed, as the Greek crisis entered a new phase with the country's party leaders failing to form a government, Italian and Spanish borrowing costs surged and banking declined. Late on Monday, Moody's rating agency downgraded the debt rating of 26 Italian banks, including giants UniCredit and Intesa Sanpaolo. Ten of them were lowered to so-called junk status, while some saw their ratings cut by as much as four notches. Meanwhile, Spain announced a consolidation of four major banks aimed at creating a lender with assets of 270 billion euro. Though some European politicians insist the eurozone would survive even without Greece, some economists say it might be the end of the game. The deterioration in Greece could result in "huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany," Paul Krugman, renowned US economist, wrote in his column in the New York Times. In this case Germany would be left with two options, according to Krugman. The first would be ... |
