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Breakup Of Single Currency 'would Plunge Eurozone Into Deep Recession'

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http://www.guardian.co.uk/business/2010/jul/07/breakup-emu-eurozone-deep-recession

Countries in the eurozone would plunge into a deep recession if European monetary union (EMU) was torn apart, with a knock-on effect on the global economy that would dwarf that of the Lehman Brothers collapse, analysts warned today.

In a bleak assessment of what would happen if EMU – intended to be irreversible – collapsed, experts at Dutch bank ING calculated that output in the first year alone would fall between 5% and 9% across various member states, while their new national currencies would fall by 50%.

Inflation in countries such as Spain and Portugal could soar towards double digits while core countries such as Germany would be suffering the opposite impact – a deflationary shock.

The assessment by Mark Cliffe, global head of financial markets research at ING, comes as the market waits for details about the methodology of stress tests applied to European banks to assess whether they can withstand a calamity in the markets.

The Committee of European Banking Supervisors (CEBS), on which the UK is represented by the Financial Services Authority, is thought to be attempting to give some clarity later today about the scenarios it has considered in gauging the financial health of the European banking system. An assessment of what would happen to banks' capital in the event of a sovereign debt crisis – considered a real possibility following the bailout of Greece earlier this year – is known to be have been included.

Cliffe and his team are not attempting to assess the probability of a full-blown sovereign debt crisis caused by a collapse of EMU but are trying to warn investors what could happen if the eurozone was torn apart.

"We do not address the potential long-term pros and cons of dismantling EMU. However, the initial trauma outlined in this report is sufficiently grave to give pause for thought to those who blithely propose EMU exit as a policy option," Cliffe said.

Some economists have argued that if individual countries inside the eurozone were able to allow their currencies to float freely, their economies would benefit and help them tackle their debt burdens. Cliffe disagrees. "If Greece and other southern European members were to leave, the ensuing currency depreciation would not directly help improve their fiscal solvency problems. In fact, unless they redenominated their existing debts into their newly depreciating currencies their debt to GDP ratios would soar," Cliffe said.

Another argument put forward by those who favour an EMU breakup is that a country might be able to grow more quickly if it were able to benefit from the price competitiveness caused by a free-floating currency. Again, Cliffe is sceptical.

Not quite sure I go along with all of this but clearly if the EMU breakups the short term consequences for some state could be dire.

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http://www.guardian.co.uk/business/2010/jul/07/breakup-emu-eurozone-deep-recession

Not quite sure I go along with all of this but clearly if the EMU breakups the short term consequences for some state could be dire.

...is the man from ING saying by leaving things as they are there will be no recession in Euroland...?... :rolleyes:

Edited by South Lorne

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Then I guess they'd better go ahead with full economic and political union.

And as I look at the wastelands of Wales, Yorkshire, the north East and Scotland during the last two recessions, exactly how will that union help Spain and Greece?

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...is the man from ING saying by leaving things as they are there will be no recession in Euroland...?... :rolleyes:

No but it will give ING time to shift all the dodgy paper they need rid of.

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EUROPEAN INDICES ALL HUGELY POSITIVE DESPITE DOUBLE DIP CERTAINTY:

London Last Trade Change Related Information

^FTSE FTSE 100 Index 4,952.66 2:18pm 129.13 (+2.68%) Chart, Components, more...

^FTLC FTSE ACT350 Index 2,617.97 2:18pm 64.90 (+2.54%) Chart, Components, more...

^FTMC FTSE MID250 Index 9,457.61 2:18pm 156.26 (+1.68%) Chart, Components, more...

^FTAS FTSE-A AllShare Index 2,562.03 2:18pm 62.18 (+2.49%) Chart, Components, more...

Frankfurt Last Trade Change Related Information

^GDAXI DAX Index 5,926.73 2:18pm 110.53 (+1.90%) Chart, Components, more...

^GDAXHI HDAX Index 2,992.73 2:18pm 57.17 (+1.95%) Chart, Components, more...

^MDAXI MDAX Index 8,026.23 2:18pm 187.11 (+2.39%) Chart, Components, more...

^MCAPM Midcap Market Index 736.64 2:18pm 18.26 (+2.54%) Chart, Components, more...

^SDAXI SDAX Index 3,916.57 2:18pm 44.47 (+1.15%) Chart, Components, more...

^TECDAX TecDAX Index 748.48 2:18pm 25.26 (+3.49%) Chart, Components, more...

Paris Last Trade Change Related Information

^FCHI CAC 40 Index 3,432.55 2:32pm 100.09 (+3.00%) Chart, Components, more...

^SBF120 SBF 120 Index 2,545.96 2:32pm 70.81 (+2.86%) Chart, Components, more...

^SBF250 SBF 250 Index 2,485.97 6 Jul 63.19 (+2.61%) Chart, Components, more...

^SBF80 SBF 80 Index 4,690.62 2:32pm 99.32 (+2.16%) Chart, Components, more...

Milan Last Trade Change Related Information

ITLMS.MI FTSE Italia All Share 20,059.76 2:13pm 131.18 (+0.66%) Chart, Components, more...

ITMC.MI FTSE Italia Mid Cap 22,627.84 2:13pm 100.29 (+0.45%) Chart, Components, more...

I952.MI FTSE Italia STAR 10,437.92 2:32pm 198.66 (+1.94%) Chart, Components, more...

FTSEMIB.MI FTSE MIB 19,627.64 2:32pm 779.08 (+4.13%) Chart, Components, more...

Madrid Last Trade Change Related Information

^IBEX IBEX 35 Index 9,813.70 2:18pm 198.70 (+2.07%) Chart, Components, more...

^SMSI Madrid General Index 0.00 1 Jan 0.00 (+0.00%) Chart, Components, more...

Scandinavia Last Trade Change Related Information

OMXC20.CO OMX Copenhagen 20 Index 401.75 2:33pm 0.30 (+0.08%) Chart, Components, more...

^OMX OMX Stockholm 30 Index 1,009.99 2:32pm 0.58 (+0.06%) Chart, Components, more...

^OMXSPI OMX Stockholm All Share Index 314.44 2:32pm 0.23 (+0.07%) Chart, Components, more...

^OSEAX Oslo Exchange All Share Index 386.64 2:18pm 13.42 (+3.60%) Chart, Components, more...

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I don't see any likelihood of the Eurozone breaking up - the consequences of it doing so would be far worse than trying to preserve the Eurozone intact. Say Greece, a bankrupt nation, left the the euro - what would be the alternative? Going back to the dracma - how much would that cost? They're not likely to want to adopt the US dollar, even less so the GB pound, are they?

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I don't see any likelihood of the Eurozone breaking up - the consequences of it doing so would be far worse than trying to preserve the Eurozone intact. Say Greece, a bankrupt nation, left the the euro - what would be the alternative? Going back to the dracma - how much would that cost? They're not likely to want to adopt the US dollar, even less so the GB pound, are they?

A lot less than they owe on the loans they would likely default on, I should imagine.

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I haven't read any mussings from the pro Euro nutters on here for a while. Shame.

Perhaps there aren't any left? :D

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And as I look at the wastelands of Wales, Yorkshire, the north East and Scotland during the last two recessions, exactly how will that union help Spain and Greece?

It wouldn't, but since they are determined to convince themselves that going back is the End Of The World, they may as well go forward. The whole currency project was a typically idealogically driven piece of nonsense. Exactly the reason why Bliar was so up for it. Credit to Brown - the one thing he did well.

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...is the man from ING saying by leaving things as they are there will be no recession in Euroland...?... :rolleyes:

i think he is.

AFAIK, debt in any currency is debt.

blame the Euro, sure, but governments borrowed and borrowed and borrowed, in some cases to lend it on again. they could do this in any currency they like.

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http://www.guardian.co.uk/business/2010/jul/07/breakup-emu-eurozone-deep-recession

Not quite sure I go along with all of this but clearly if the EMU breakups the short term consequences for some state could be dire.

No, I don't agree with this. The fact that there would some rebalancing of currency values and changes of respective countries outlook, would be part of healing them from suffering incorrect interest rates and currency values which have actually exacerbated the problems of the least wealthy states.

Again, it is pro EU propaganda, when it is the EU monetary system which has made matters worse. The lending of yet more and more to shore up the overborrowed Greece is a case in point. Theclaim yesreday they have slashed 40% from their deficit is not likely to bear examination. It was only Mid May when they had to roll over an enormous debt which could be financed in the money markets. They lied about their finances to enter the EU, so I do not trust their claims.

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Not quite sure I go along with all of this but clearly if the EMU breakups the short term consequences for some state could be dire.

I've just come back from a walk in the woods and there was bear sh*t all over the place.

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I haven't read any mussings from the pro Euro nutters on here for a while. Shame.

I was thinking the same about the 'euro about to implode' nutters who were posting a couple of months back. Since then the mighty dollar has fallen back below 80 eurocents again as the first amongst equals in the axis of evil slips further into the mire.

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  • 142 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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