NEW YORK (TheStreet) -- Greece borrowed a bit of breathing room late last week when it delayed a debt payment that was due to the International Monetary Fund, while continuing to negotiate with its creditors. But the ongoing disagreement and the uncertainty it breeds are already doing economic damage to the whole eurozone, according to Dr. Dennis Novy, an associate professor of economics at the University of Warwick in Coventry, England. The eurozone is segmenting, and assets are shifting out of Greece, leaving its financial markets isolated. More broadly, consumer confidence and investment are suffering across the E.U.
Novy said he believes Greece does intend to pay the money due this month, but there is no sign that the wider negotiations are getting any easier.
While the situation in Greece has been discussed at the G7 meeting, Novy doesn't see the G7 having any significant role to play in resolving the debt crisis, and, moreover, said he strongly doubts Athens wants another entity putting pressure on it.
While Greece makes up only about 2% of the eurozone economy, Novy said the issue isn't solely about that country. "This is really about other countries further down the line," he said. Specifically, he points to Spain and Portugal, which have debt issues of their own, and upcoming elections in which parties with similar economic views to the Greek government are in contention.
"It's a difficult situation for the European Union," said Novy. "If in Greece, you have a very hard-core left-wing government that is seen as very successful by people, and if it gets its way, then what kind of message is this going to send out to similar parties?"
Novy called that a "serious worry" for the European Commission. "This could trigger even more instability," he said, "and at the end of the day, this is about the eurozone more broadly and of course, it's very damaging."
Greece is now working toward a June 30 deadline to make a single repayment of all the debt payments it had due this month. According to the Associated Press, such "bundled" payments are permitted under IMF rules, but the option has only been used one time previously, by Zambia in the 1980s.