A Greek default followed by a departure from the euro zone could bring about short-term benefits for the country, explains IESE Prof. Morten Olsen of the Economics Department. Other countries that have defaulted in recent years, such as Russia, Argentina and Iceland, have rebounded relatively quickly, suggesting that Greece may be able to do the same. And by going back to the drachma, Greece will be able to depreciate its own currency, regain competitiveness and boost exports.
But a Greek exit is risky for Europe, since it could trigger bank runs in other countries. If that happens, the EU will have to decide if it wants to step in and rescue banks and governments. Prof. Olsen points to two options for stabilizing the economy: the EU could introduce euro bonds or the ECB could buy government bonds that private investors are no longer willing to hold.