Head of the International Monetary Fund, Christine Lagarde, has warned that the consequences of Greece exiting the euro would be "extremely expensive and hard, and not just for Greece." While the impact would be hard to predict, Lagarde said the IMF has to be "technically prepared for anything".

As talks to form a coalition government collapsed in Greece, Lagarde revealed that the IMF has conducted a technical assessment of a possible Greek exit from the euro.

In an interview with a Dutch public television broadcast, she said:

I am not suggesting that this is a desirable solution. I am just saying that this is within the range of multiple options, one that we have to technically look at.

Lagarde added that a Greek departure from the euro "would be extremely expensive and hard, not just for Greece" and would not be a clear reflection of the will of the Greek people.

Related News: Greece Heading Towards Re-Elections & Euro Exit

Related Story: Europe's Policy Problem: Balancing Austerity With Economic Growth

The country's economic crisis has culminated in a political crisis, following an inconclusive election on May 6 when parties opposed the austerity terms of the 130 billion euros ($168 billion) bailout package. The political deadlock now increases the chance that rescue funds could be halted, pushing the country closer towards bankruptcy and a euro exit.

Greece has been awarded two bailout packages largely funded the IMF and the EU, and the Greek austerity budget has taken a heavy toll on economic activity and depressed consumption, with youth unemployment now exceeding 50 percent.

Related News: International Pressure Force Greece To Cut 15,000 Public-Sector Jobs

Related News: Greek Athletes Risk Missing Olympics Due To Cuts In State Funding

The risk of contagion, reminiscent of the 2008 Lehman Brother's collapse, has already spread to international markets, sending stocks and commodities tumbling.

In a blow to confidence, the European Central Bank said yesterday that it had ceased liquidity operations with several Greek banks because of their capital were too depleted.

Greeks have withdrawn hundreds of millions of euros from banks in recent days as the fears grow that the country might be forced out of the euro zone, although there has been no sign of a run on Athens bank branches.

Giving his take on the situation, ECB president Mario Draghi said:

I want to state that our strong preference is that Greece will continue to stay in the euro zone. But since the treaty does not foresee anything on (an) exit, this is not a matter for the ECB to decide.

Related Story: Is Greece Still Headed Down A Dangerous Dead-End Path? : Mohamed El-Erian

Related Story: Euro-oddity - The ECB's Peculiar Stance On Greece's Debt: Joseph Stiglitz

Related Story: Silver Lining In The Greek Tragedy