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Greece

New Study: Worldwide Depression Guaranteed If Greece Exits Euro

LES ECHOS (France)

Worldcrunch

A study published this week by two economists for the German Bertelsmann Foundation says that if Greece defaults on its debts and leaves the euro zone, it would cost the world’s major economies 17.8 trillion euros by 2020, and cause a severe worldwide depression, reports French business newspaper Les Echos.

Greece’s exit from the euro could happen as soon as early 2013, says economist Megan Greene of Roubini Global Economics, a think-tank founded by Nouriel Roubini, an economics professor who is widely credited with predicting the 2007 crisis.

Greece is already facing “a decade of depression” because of austerity, Greene says.

Willem Buiter, head economist at Citigroup, formerly at the Bank of England, also believes that Greece will probably leave the euro zone by 2014. The Swedish finance minister and former central banker Anders Borg, whom the Financial Times called the best finance minister on the planet, thinks that Greece could abandon the euro within the next six months.

The Bertelsmann Foundation and Prognos AG, an economic consulting company, asked German economists Thieb Petersen and Michael Böhmer to analyze the cost of a Greek default and departure from the euro zone. The economists say that the initial effect on the EU and the world economy would be slight. The impact would come from the effect the default would have on financial markets. Capital investors would lose all confidence in getting their money back if they invested in Italy, Spain, or Portugal, leading those countries down the Greek road toward bankruptcy, which would pull the rest of Europe into the quagmire and cause a “severe worldwide depression,” according to Petersen and Böhmer.

The two economists say that of all the countries that would be hurt, France would pay the highest price, which they estimate at 2.9 trillion euros. Next would be the United States (2.8 trillion), China (1.9 trillion), and German (1.7 trillion). This catastrophic must be avoided at all costs, the economists concluded.

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Economy

Lithium Mines In Europe? A New World Of Supply-Chain Sovereignty

The European Union has a new plan that challenges the long-established dogmas of globalization, with its just-in-time supply chains and outsourcing the "dirty" work to the developing world.

Photo of an open cast mine in Kalgoorlie, Australia.

Open cast mine in Kalgoorlie, Australia.

Pierre Haski

-Analysis-

PARIS — It is one of the great paradoxes of our time: in order to overcome some of our dependencies and vulnerabilities — revealed in crises like COVID and the war in Ukraine — we risk falling into other dependencies that are no less toxic. The ecological transition, the digitalization of our economy, or increased defense needs, all pose risks to our supply of strategic minerals.

The European Commission published a plan this week to escape this fate by setting realistic objectives within a relatively short time frame, by the end of this decade.

This plan goes against the dogmas of globalization of the past 30 or 40 years, which relied on just-in-time supply chains from one end of the planet to the other — and, if we're being honest, outsourced the least "clean" tasks, such as mining or refining minerals, to countries in the developing world.

But the pendulum is now swinging in the other direction, if possible under better environmental and social conditions. Will Europe be able to achieve these objectives while remaining within the bounds of both the ecological and digital transitions? That is the challenge.

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