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New Study: Worldwide Depression Guaranteed If Greece Exits Euro

LES ECHOS ( France)


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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FOCUS: Russia-Ukraine War

Putin's "Pig-Like" Latvia Threat Is A Chilling Reminder Of What's At Stake In Ukraine

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Photo of Russian President Vladimir Putin

Russian President Vladimir Putin

Pavel Lokshin


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