The future of Eurozone
Over the past few months - and more precisely since July 2011 - the Eurozone crisis has escalated. During summit after summit, European leaders had fallen short of delivering credible solutions to contain, let alone solve, the crisis. And indeed, in November, even politicians acknowledged that a breakup of the Eurozone, in whatever form, could no longer be excluded. In this context, Eurozone breakup scenarios have become ‘en vogue’. This report made bij Atradius starts by describing the current crisis and its background. Then Atradius discuss the likelihood of a Eurozone breakup in some detail, as well as what to us is the more likely ‘Sticking Together’ scenario.
The report made by Atradius also offers an overview of events since the Lehman default. In short, it aims to provide the reader with an overview, in-depth analysis and a likely future path of development. John Lorié, Chief Economist Atradius: ‘’We highlight that the loss of confidence in financial markets and the rapid contagion stems from the deep financial integration within the Eurozone. Cross-border exposures have become so large that a substantial write-down of foreign debt would make it very difficult for governments to bail out all defaulting banks. Countries with weak growth potential will be even less able to bear significant losses. Throughout the past decade, the relative competitive position of the Eurozone periphery compared to the core has reduced, leading to a gradual worsening of the fundamental imbalances within the Eurozone that were present from the start. And these imbalances have, in the current environment, become critical. Solving this fundamental divergence will be imperative for keeping the monetary union together over the longer term.’