Eurozone endgame

Eurozone endgame

Anyone who believes the Irish bailout is going to solve the Eurozone crisis, or stop the EU from folding, better think again. It's just a transfer of risk.

Economist Simon Johnson presents a number of endgame scenarios, all of which are disturbing. They will certainly change the world as we know it.

One will see Greece leaving the Eurozone, with Germany saying good riddance to bad rubbish, they should never have been there. Under this scenario, Germany will be reimbursed with significant grants for keeping the illusion of European unity going. Ireland will stay, but its citizens will emigrate.

Another scenario would see the Eurozone divided up into the "relatively prudent" and the "relatively imprudent". That would restrict the EU to Germany, the Netherlands, Austria, Finland, and a few smaller countries. Italy and Spain are out and there's a question mark over France.

And in another nightmare scenario put up by Citigroup chief economist Willem Buiter, there would be three or more defaults over the next five years.

And in the meantime, Ireland will continue to struggle, and what a mess the banks have created. Here are some facts about the Irish meltdown: the average Irish family owes an estimated € 132,000 to the banks; 33% of first-time home buyers in 2006 bought them with no money down and as many as 29 Irishmen involved in real estate have committed suicide since the crash began.

The Irish bailout is no silver bullet. The problems remain and there are serious question marks over Portugal and Spain.

If nothing else, Europe is testimony to the destructiveness of banks.


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