Greek election outcome may affect future of Euro, European Union

Head of Greece's Radical Left Coalition Alexis Tsipras, speaks during a presentation on his party's economic policies in Athens, on Friday, June 1, 2012. Tsipras, whose strong gains in last month's elections deepened concerns over his nation's economic future, vowed Friday to cancel Greece's international bailout agreement if he wins an upcoming repeat ballot.
AP Photo/Petros Giannakouris

(CBS News) As bad as unemployment is in this country, it is much worse in Europe. The European Union reported today that the jobless rate in the 17 countries that use the Euro averages 11 percent, the highest since the currency was introduced 13 years ago.

On the currency trading floors of London, they're even more nervous than usual. They know that the fate of the European financial system -- and maybe the world's -- may now be in the hands of the voters in one small country: Greece.

Its near bankrupt economy may be tiny -- just two percent of Europe's -- but the election there in two week's time is being fought over whether to accept or reject the $160 billion European bail out plan and the harsh cutbacks in government spending and state pensions it demands.

The candidate leading in the opinion polls, the leftist Alexis Tsipras, today promised to scrap the deal if he wins. His followers may like the idea, but Greece defaulting on its debt would mean being kicked out of the euro currency zone by the sixteen other countries in it.

The Greek stock market crashed even further on the news.

And, the European money markets fear the damage won't stop there.

"Everybody is hugely worried about contagion," David Buik from currency brokerage firm BGC told CBS News. He says the whole Euro-zone project is at risk.

"It's like a pack of dominoes," he explained.

Here's how that works. If the Greeks default on their debt, the loss of confidence in the Euro would undermine the already weak Spanish banks. Italy, Portugal and other shaky economies would follow. The Euro itself could collapse.

"You end up with something like 20 percent unemployment, and you end up with almost certainly with recession across the world," Buik said.

German officials said that the idea of removing Greece from the European Union is "not unthinkable." Despite the fact the process will be expensive, they think the euro will be able to recover.

  • Mark Phillips, CBS News London correspondent
    Mark Phillips

    Mark Phillips is CBS News senior foreign correspondent based in London.