We could all be losers in this Greek poker game Well now, surely, we can all see what was always true. Greece could leave - and that is not only a possible, but an increasingly probable, outcome. And if Greece leaves, and the myth of euro-exit impossibility is fully and demonstrably exposed, then other nations could soon follow. Last week, political parties that few outside Greece have ever heard of ultimately failed to piece together a coalition government after the inconclusive election on May 6. The impact of that has been enormous, with global financial markets forced to focus on the prospect of Greek ejection from the single currency. As a result, asset prices dived, with investor sentiment, which has been deteriorating for some time, now very firmly switched from "risk-on" to "risk-off." Since the start of May, the FTSE All-World equity index has fallen in all but two trading days, losing almost 10pc of its value. Investors are petrified of a Greek euro exit, not because the country itself is economically important, but because of "contagion" risks. Greece represents just 2pc of the eurozone's overall economy. A bath plug, though, accounts for around 2pc of the internal surface area of a bath. If Greece leaves, and the country's debts are redenominated in deeply-devalued drachma, creditors of all "peripheral" eurozone nations, having been pretty skittish for several years and more recently becoming frazzled, could end up enduring a collective nervous breakdown. In that event, the single currency would simply drain away. Greek politicians are embroiled in policy deadlock. Not only has no coalition been formed, but there isn't even agreement on appointing another technocratic government. The current "caretaker" administration simply won't be able to implement the measures needed to meet the conditions of the next "bail-out." With political tempers rising, and electorates in the wealthier eurozone nations increasingly outraged, the "troika" of European bigwigs now refuses even to visit Athens to review progress on the Greek austerity programme until new elections have been held. With earlier bail-out funds already in the can, Athens can meet its short-term welfare bills and keep on paying its creditors, but only for a few more weeks. So something needs to happen - and fast. The public, meanwhile, and the broader markets are taking matters into their own hands. The eurozone has been suffering from a gradual bank-run since early 2010, with deposits leaving the fringe countries and heading for stronger members. But this trend has lately accelerated. Some are now not only moving their money, but also withdrawing it altogether and hoarding physical euros. Greek savers pulled €3bn (£2.42bn) from domestic accounts in the 10 days following the botched election. At the end of March, total deposits were down 17pc year-on-year. Updated figures, if they are ever published, will be much worse. Deposit flight is hardly surprising. A newly reinstated Greek drachma would immediately plunge in value. Investors are also foreseeing the strict capital controls that would come down just before any imposed Greek exit. A bank run, of course, can rapidly escalate into a bank collapse, and then a sovereign collapse. What would the European Central Bank do? If it stepped in, other "peripheral" nations, seeing non-conditional bail-outs back on the table, would throw their austerity programmes to the wind. Moral hazard, as this column has often said, is not an academic parlour game. And anyway, given that the ECB is bank-rolled by other eurozone countries, another rescue could see governments in Germany and elsewhere finally losing their temper and insisting that Greece is chucked out. The upcoming Greek election is scheduled for June 17 - so still the best part of a month away. That's a long time for global markets to fret. The far-left Syriza party, which wants to abandon the latest debt-restructuring deal, is leading in the polls. More mainstream parties, their support fast falling, are struggling to convey that restructuring matters and that ignoring it would spark a Greek exit How could it not? Yes, the Germans, Finns, Dutch and others are spooked by the chaos "Grexit" would cause, which gives Syriza and its like some bargaining power. But a refusal to play ball would surely mean the "eurozone solvents" let Greece go. Temporary respite may come if Greece manages to form a government. But this will likely prove short-lived. Ongoing debt-restructuring will mean more austerity and worsening civil unrest. And even if the ECB goes for further big-time money-printing, that won't address the underlying imbalances at the heart of the eurozone. There is and always was, of course, a fundamental contradiction at the heart of the single currency project. While the ECB controls interest rates and the money supply, each country's fiscal surplus or deficit is driven by the tax and spending decisions of its own sovereign government. So, it's simply impossible to enforce collective fiscal discipline in a currency union of individual states, each answerable to its own electorate. The only alternative is to subjugate domestic voters and create a federal government across the eurozone, with a common fiscal policy allowing cross-border transfers. But that's almost political union, and is now further away than ever. Right across Europe, much of the public has been deeply suspicious of the euro ever since the idea was conceived. The French only voted "oui" to joining by the narrowest of margins, after their government cobbled together votes from former colonies. The German public, like citizens in so many other member states, was never granted a referendum. Since the single currency's 1999 launch, in fact, there hasn't been a single independent opinion poll in Germany in favour of euro membership. No wonder the hard-working German public is seething about the prospect of yet more Greek bail-outs - and who can blame them? The eurozone's sovereign debt crisis is casting a long shadow across the entire global economy. Just as the Western world was climbing out of recession, the systemic instability of Europe's Frankenstein currency union risks sparking another deeply damaging asset-price plunge. This Greek poker game, however it ends, means markets face the danger of some serious volatility. And then, of course, there is Spain... Liam Halligan is chief economist at Prosperity Capital Management