UK economy could shrink by 2pc if Greece exits euro Our euro area economists have highlighted the possibility of a circa 4pc decline in euro area GDP in the event of a Greek exit. Even with a moderate degree of fiscal loosening, we think that could threaten a circa 2pc decline in UK GDP," warned a report issued by the Bank of America Merrill Lynch. However, Bank of England policymaker Martin Weale has said he is sure the UK economy can withstand withdrawal of Greece from the eurozone but that it could be a source of "disturbance," adding that the eurozone is very much still behind UK economy's weakness. Greece has called a second round of elections for June 17 after politicians failed to form a majority. However, polls suggest that there is an increasing risk of the electorate opting for an anti-austerity government which would cast doubt over further bailout payments from the EU, potentially leading to a forced exit from the eurozone. The Bank of America report predicts that in that scenario Greece would see a GDP contraction of 10pc within a year. The head of the body which represented holders of Greek bonds in the recent restructuring, Institute of International Finance (IIF), Charles Dallara, has also warned that the world economy would suffer badly. He urged the EU to set up a system to guarantee savers' deposits in banks. "It is a mistake to think that an exit by Greece from the eurozone will not have a very serious effect on the European banks, on the ECB, on countries like Italy, Spain and Portugal due to contagion," he told Il Sole 24 Ore newspaper. Furthermore, it would destabilise the whole world economy.