By Mamonov Roman
Economic scientists are discussing a fall of the euro, predicted last week by the former head of the European bank for Reconstruction and Development Jacque Attali. According to him, there is only a 50-50 chance of the euro surviving until Christmas.
Although many regard this forecast to be too gloomy, the current crisis raised doubts about the future of the euro-zone. The Voice of Russia has questioned prominent Russian economic experts about possible repercussions of the euro-zone collapse.
Economic scientists have been unwilling to make forecasts for the three years since the global recession of 2008. The disturbances uncovering serious problems may force start a global overhaul of the whole system. Some experts believe that the collapse of the euro-zone could become the first step in the overhaul.
But that will come later. First, a decision by any country, for instance, Greece, to leave the euro-zone, even temporarily, will have terrible consequences. Bond market panic will grip European banks; investors will sell bonds of the weak European economies and buy those of the strong ones. It will inevitably trigger a liquidity crisis, says the head of the New Economic School Sergey Guriev.
“If Greece leaves the euro-zone, the markets will start to guess which nation is to follow. If they come to a conclusion that it is Italy, they will start to sell the Italian bonds and buy the German ones. Bonds prices plummeting will wreak havoc in the banking system and plunge the global economy back into recession. The European financial authorities will try to avoid any major bank bankruptcy, as the repercussions of this are huge.”
Liquidity problems will threaten the whole interbank deposit market. Some credit organizations, especially those that purchased problem countries bonds, will face serious misbalance risks. This crisis could lead to a mass panic when people rush to withdraw their funds. Authorities will have to work hard to calm down the population, says the former Minister of Economic Affairs Evgeny Yasin.
“In my opinion, all the European governments and central banks understand that the markets are jeopardized by panic trends. They will do all they can to avoid this.”
There will be some other problems as well. How to introduce national currencies? How to calculate exchange rates in these volatile conditions? How to convert debts? Will the countries keep their obligations? What is to happen to billions spent in rescue packages? In what currency the current deals will be paid for? There are too many questions. Deputy Finance Minister Andrey Vavilov believes they will remain unanswered as the euro-zone crisis is never to happen.
“There is no country which could benefit from leaving the European Union or the euro-zone. How can it possibly break up?! I do not see this happening.”
However, not too many analysts are this upbeat, as the European Union is surviving tough times. Before the crisis unraveled, all the countries were looking forward to joining the European Union and the euro-zone, believing it to be beneficial. In the aftermath of the disaster, most of the Union participants decided to stay aside, not willing to bailout their neighbors. Only by overcoming these attitudes the countries will manage to save the euro and make it stronger than before, analysts say.