7. So what does this mean for the global economy?
Maybe not as much as we think. Europe's firewall seems to be working. It's hard to say what would happen in the worst case of Greece leaving the euro zone, but it's probably something like this:
Greece. The new drachma would plummet, inflation would soar into the double digits, imports such as food and oil might need to be rationed, companies that borrowed in euros might go bankrupt, and the government would have to balance its budget overnight. In other words, things would get a good deal worse than they already are, which is saying something when you're talking about a country with 25 percent unemployment. But after a year or two, this pain would pass and Greece would be left with a cheaper currency that would make its exports more competitive and its tourism more attractive.
Europe. First off, they'd lose real money here, as in the hundreds of billions. Greece's government hasn't just gotten 240 billion euros, but its banks also have received 89 billion euros in loans from the ECB that might be defaulted on in the case of euro exit. Second, there'd be some contagion. Borrowing costs could creep up for Italy, Spain and Portugal, but the fact that the ECB is already buying their bonds and has promised to buy as many as it takes to keep their interest rates low means they shouldn't rise that much. Third, all this uncertainty should make the euro fall further, boosting their exports in the process. And finally, though this might sound cruel, the worst thing that could happen to Europe is if Greece does well after it leaves. That would embolden anti-austerity parties in the rest of the continent by showing that they have nothing to lose but their fiscal chains by challenging the continent's budget-cutting orthodoxy.