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Three years after Mario Draghi pledged to do whatever it took, within his mandate, to save the euro, the breakdown in the Greek rescue talks is calling into question the integrity of the entire currency union.

While Greece accounts for less than 2 percent of the eurozone’s output, its exit would hurl the bloc into unknown territory by setting a precedent for other nations to reconsider their membership.

Greek Prime Minister Alexis Tsipras upped the ante just before the weekend by refusing to immediately accept creditors’ conditions for extending aid beyond June 30 and instead calling a referendum on the proposals. The crisis threatens to undo much of the work that Draghi, president of the European Central Bank, has done to shore up confidence in the euro as a leading currency of global trade.

“It’s hard to believe it, but the Greek referendum has called time on Mario Draghi’s ‘whatever it takes’ promise,” said Lena Komileva, founder and chief economist of London-based research company G Plus Economics Ltd. “Markets need to brace themselves for the growing likelihood that the Greek standoff will go past the wire and the euro will come out broken on the other side. This risk is vastly under-hedged.”

Talks founder

Eurozone finance chiefs turned down Tsipras’s request to extend Greece’s aid program to allow the July 5 referendum to take place, and instead started making preparations to contain the fallout of a so-called Grexit. The ECB said on Sunday it will keep the emergency aid to Greece’s financial system intact.

“The political argument is very much in favor of keeping the project together and keeping all-comers within,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. in London.

Yet patience is wearing thin on all sides. Even before the lastest breakdown in talks, German Finance Minister Wolfgang Schaeuble warned Friday of the harm an ineffective resolution to the crisis may do to the euro.

Risks ‘dramatic’

There’s the risk of losing “confidence in markets, in the euro, the monetary union,” he said at an event in Frankfurt. “This can be dramatic. We destroy the monetary union.”

Since its inception in 1999, the euro has climbed as high as $1.6038 in mid-2008 and fallen as low as 82.3 U.S. cents in late 2000. It ended last week at $1.1167 after its first weekly decline since May.

The euro has survived trials before. It dropped almost 10 percent against the dollar in October 2008 as the collapses of Bear Stearns and Lehman Brothers Holdings Inc. sent shockwaves through global markets, only to recover those losses by the end of the year.

Euro’s resilience

The single currency has proved remarkably resilient, though, amid the ebb and flow of the Greek bailout talks, climbing 2.6 percent against a group of Group-of-10 peers since the end of March. It’s on course for its best quarter versus the basket since 2013.

Strategists give a variety of reasons for its strength, from money managers canceling euro hedges as they dump bonds and stocks to optimism Greece will pull through. That optimism may soon be shown to have been misplaced.

Global central banks cut their euro holdings by the most on record last year, and it now accounts for just 22 percent of worldwide reserves, down from 28 percent before Europe’s debt crisis five years ago, according to the International Monetary Fund.

“If Greece leaves the euro, or even just defaults, then the uncertainty around the euro increases,” said Marshall Gittler, head of global currency strategy at IronFX Financial Services Ltd. in Limassol, Cyprus. “A solution to Greece would be bad for the currency, default would be worse and Grexit would be terrible.”

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