Euro Crisis Essay examples

2775 Words Aug 23rd, 2012 12 Pages
EUROZONE CRISIS
The Eurozone in 2012

EUROZONE CRISIS: Eurozone fracture in 2012

This paper outlines a plausible scenario in which the Eurozone fractures in 2012. Events are unlikely to follow the path precisely as described, given the complexity of the problem and the number of variables which are continually changing. That said, we feel 2012 is unlikely to end with all the current members still being part of the Eurozone. Mapping a ‘break-up’ scenario should help readers understand how fragmentation could occur and therefore assist businesses’ contingency planning. To this end the paper highlights some key events and when they are due to take place. It also identifies some key indicators to monitor which are likely to dictate
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4. Mario Monti being unseated in Italy and the government’s relationship with European partners and the IMF turning sour.
5. Weak growth figures in major European economies (e.g. quarterly GDP and employment).
6. A wave of euro-scepticism across the Eurozone with governments under pressure to resist austerity measures and fiscal union.
Positive Indicators:
1. Eurozone banks making heavy use of the ECB’s unlimited supply of three-year loans and investing this in PIIGS sovereign debt, driving bond yields lower.
2. The ECB making a commitment to purchase sovereign debt directly and in unlimited quantities.
3. The Eurozone’s AAA rated governments agreeing to issue bonds jointly to support the rollover of PIIGS’ sovereign debt.
4. Governments (especially Spain and Italy) making substantial progress on meeting their fiscal targets and reform measures.
5. Eurozone governments reaching credible agreements to impose legal limits on sovereign debt and deficits, empowering AAA rated economies to make the political case for more bailout action.
6. Eurozone leaders delivering the promised funding of €200 billion to the IMF and €500 billion to the European
Stability Mechanism (ESM) during the first half of the year.

Some Important Dates in H1 2012:
31 January – The EU/ECB/IMF Troika’s mission to Greece is likely to conclude ‘haircut’ negotiations with creditors and

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