Only ‘two options’ left for eurozone  May 23rd, 2012

Investors need to steel themselves for a potential change of circumstances in the eurozone as the ongoing political crisis in the region leads to the possibility of either Greece's default and exit or full fiscal union between the member states, an expert has suggested.

John Greenwood, chief economist at Invesco Perpetual, argued that the current political situation in Holland, Germany and France show a move away from austerity policies from voters, indicating that it is unlikely extended financial cuts will solve the problems facing the eurozone.

This is likely to be underlined by the upcoming election in Greece, with voters not keen to support further austerity measures despite wishing to remain part of the eurozone, Mr Greenwood added.

"Eurozone capitulation to the need to bail out Greece, Ireland and Portugal has undermined the monetary union and the risk of contagion now threatens its very existence," concluded the economist.

Individual European countries have been advised to prepare a contingency plan for Greece's exit from the single currency, Reuters reports.