- When will the horror show in the Eurozone end? I doubt it will survive past 2012!
Better a horrible end for Euroland, or endless horror?
By Ambrose Evans-Pritchard, http://www.telegraph.co.uk/
While we are waiting for Mario and Merkozy plus, just a quick thought on one of the EMU break-up reports hitting my desk daily, and sometimes in twos and threes.
The Dutch bank ING has had another go at the numbers, calculating that the Greek Drachma would fall by 80pc against the D-Mark in a full-blown disintegration. The Escudo and the Peseta would fall by 50pc, and the Lira and the Punt by 25pc. Germany would suffer a “deflationary shock”.
The whole eurozone would crash into depression, with a GDP contraction of around 9pc in 2012 — Germany (-7.4), France (-9.1), Portugal (-12.7), Greece (-13.1).
Outside: UK (-5), Poland (-6.6), US (-0.2), Japan (-1.1). The price of oil would drop to $55 a barrel. The US would flirt with deflation. The contraction would continue into 2013, before gradually stabilizing.
“Events of the past year have proved beyond doubt that the Eurozone is far from a textbook `optimal currency area’. But this is an omelette that cannot readily be unscrambled ,” said ING’s Mark Cliffe. … His report is less dire than a UBS note predicting a 50pc collapse in peripheral GDP, and 20pc to 25pc in the core, but it still begs the question:
If the intra-EMU currency misalignment is so extreme that free floats would cut Greece by 80pc, and Spain by 50pc, it surely validates the eurosceptic argument that monetary union has become a preposterous and unworkable arrangement.
It will take hideous contortions to hold the system together for year after year if ING is close to right on these numbers, with perma-slump, endless austerity, and ever greater macro-economic absurdities, so why persist?
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