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By Ingrid Melander
January 27, 2012 6:42 AM EST
Argentina's chaotic bankruptcy a decade ago triggered riots, looting and dozens of deaths. The prospect of that horror scenario playing out in Greece is focusing minds across Europe as the threat of default remains all too real.
At best, if private creditors walk away from a voluntary debt restructuring, a disorderly default would shut Greek banks for days to give Athens time to prevent a bank run by reassuring depositors that the lenders will not go bust.
At worst, if EU partners also pull the plug, Greece risks a chaotic descent into an extended bank freeze, possible shortages of basic goods, violence and what central bank governor George Provopoulos called the "hell" of a euro exit.
"If banks were hit, I could not import goods any more. I would have nothing to sell. How would I survive?" 66-year old shop manager Antonis Broukias asked in his old-fashioned books and stationery store in central Athens.
"I will surely shut down my shop, especially if we return to the drachma," Broukias said, adding that he was worried protests could turn violent.
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Athens and its private creditors are scrambling to avoid a messy default that could drag the whole euro zone into a much deeper crisis. But talks have stalled and the clock is ticking down to a major bond redemption due in late March.
Even if a deal is struck, Greece's EU and IMF lenders have made clear they will not sanction a 130 billion euros bailout package unless Athens pushes through more budget cuts and implements a series of long-agreed austerity reforms. If unimpressed, they could pull the plug on aid at any time.
The fate of Greek people and businesses if there is no deal with private creditors, who are being asked to take hefty losses as part of the new bailout, largely depends on whether the EU, European Central Bank and IMF - tired with Athens' failure to meet reform targets - would stand by Greece.
If they don't, people worried that the banks might shut or their deposits could be turned into a new currency would likely rush to get their money out, prompting a run on the banks.
That would be the first and most visible effect of a crisis that would hit the whole country of about 11 million people, which has just entered its fifth consecutive year of deep recession and depends on external support to stay afloat.
"Leaving the euro would be a disaster," said 73-year old pensioner Petros Haris. "If you ever win the lottery, take it all out of the country!" he said as one of Athens' many street lottery vendors walked by.
His 30-year-old son, a lawyer who came back from France four years ago to set up his own business, is considering leaving again, he said.
EURO EXIT?
Under the worst-case scenario, Athens would struggle to pay pensions and salaries for its bloated public sector.
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