Grexit: A deep and long-lasting depression for Greece

Europe has experienced six major currency break-ups since the beginning of the 1900's: the Latin Monetary Union (1865-1927, involving Belgium, France, Italy and Switzerland at first), the Scandinavian Monetary Union (1873-1914, involving Denmark, Norway and Sweden), Czechoslovakia (break-up in 1993), the Austro-Hungarian Empire (collapse in 1918), the Soviet Union (collapse in 1991) and Yugoslavia (collapse in early 1990's). In the first three cases, the break-up was fairly smooth, as economic and monetary integration was limited (in the first two cases, there was no common central bank and no centralised payments). However, the last three examples saw a huge economic impact and in some cases hyperinflation - in part due to the structural changes at the time but also to the strong economic, political and financial linkages between these economies, says Societe Generale.

The consequences of Grexit would be closer to the second category, given its integration within the euro area. However, while the irreversibility of the euro would no longer be true, Grexit would not mean a full euro area break-up. Looking at the small economies after the collapse of the Soviet Union - such as Romania or Bulgaria - or at the aftermath of the Currency Board exit in Argentina in 2001 would appear more relevant comparisons with Greece today. The 2008 crisis in Iceland and the 1990's financial crisis in Sweden and Finland may also give some good indication of what may happen to Greece.

Overall, Grexit is likely to have a strong negative impact on the Greek economy, of between 15% and 35% of GDP over at least five years. During this period, as discussed at Tuesday's Euro Summit, Greece would receive humanitarian aid. As long as Greece remains in the EU, structural, cohesion and CAP funds would still be available and Greece could also potentially benefit from the Balance of Payment facility which is only opened to non-euro Members.

However, as there is no euro exit clause in the EU Treaty and as EMU participation is a legal obligation for Member States, there may be a case for arguing that euro exit without EU exit would not be legally conceivable. If this proves to be true, Greece would lose access to the structural, CAP and cohesion funds - for which it is one of the largest recipients with almost 3% of GDP per year, notes Societe Generale.