What Will Happen When the Eurozone Collapses?

As political dithering continues, it looks more and more likely that the euro zone will break up, if not completely, then perhaps with some countries being cut loose.  Ireland is one of those countries, which may explain why the government is so diligently adhering to the terms of the troika agreement, and even going beyond it in the case of last week’s payout  to the unsecured Anglo bondholders.  It could be intended to placate those who will ultimately decide who gets kicked out : Germany and France.

In other words, Germany.

In a disturbing piece published in today’s Examiner, and in an expanded version on his own blog, Brian Lucey explores some of the consequences for Ireland if we have to abandon the single currency.

He argues that if any country leaves the Euro, it will cause a cascade effect leading to the disintegration of the the eurozone.  Alternatively, if the Germans decide not to bankroll the system, the euro is also doomed, and Lucey argues that any sensible government ought to be planning how to deal with the consequences, which will be extreme.  A sharp rise in the cost of imported goods and services.  More expensive oil and gas.  Savage cuts in government spending to create a balanced budget immediately.  Big increases in the interest we have to pay on sovereign debt.  High inflation.

The scenario that Lucey outlines would, in my opinion, cause widespread hardship and civil unrest, leading to an inevitable crackdown by government, limiting all sorts of civil liberties, including free speech. Websites like this one might not be permitted to exist in the harsh financial winter we face.

Read what Brian Lucey has to say and take it on board.  He isn’t making it up.



12 thoughts on “What Will Happen When the Eurozone Collapses?

  1. The endgame could be similar to the position Ireland would have been if it had told the bondholders to go *%$£ themselves & had defaulted at the start. With one major difference the country has been weakened by austerity measures etc, the result of sellout politicians who have put their own financial classes interests above their own people & constituents.This will make it much harder to achieve eventual recovery. No matter, those responsible will be fine. Iceland meanwhile is on the road to recovery because they had the balls to stand up & fight.

    Lucey only talks about one option, Ireland going it alone, there is also talk of a 2 tier EU, or Germany leaving & setting up a kind of Northern economic league, & don’t forget the Irish banks are still probably exposed to other PIIGS debt not including France & Austria which is now looking shaky.

    The best minds out there are divided on what mechanism will emerge, so I would suggest keeping an open mind. Shame about all the cash wasted on those who caused this £$%^ up, the banksters & the mainstream media & politicians lies & disinformation that has drowned out the voices that have been saying since 2008 that the collapse was inevitable & it was all a case of pouring good money after bad.

  2. BHomes November 12, 2011
    The Guardian interviews Gillian Tett FT and Paul Mason BBC
    Can Europe pull back from the brink?
    “PM: Just because the cost of breakup is so great doesn’t mean it won’t happen. I was leaked some bank research and the sliding scale of banks that went bust was so frightening I decided it was impossible to report without causing panic”
    “PM: It’s inevitable Greece will default and exit. I think Ireland will be saved because there’s too much riding on it as a big version of Monaco. Portugal doesn’t really matter, it’s not systemic, and so it all comes down to Italy.”
    And in a recent twitter exchange PM explains the Monaco reference:
    “yes but the reason the Brits want to save Eire is its role as offshore financial centre

  3. it seems to me not that i know an awful lot about the situation that the issue isn’t austerity measures. but decision making , because after reading the article it’s quite clear it is austerity measures, either way.But like i said i’m open to correction because obviously i like anyone else would prefer not to have extreme austerity measures in place

  4. I can only observe.
    I have as yet not figured out what to do when it comes.
    The post war German survivors had similar to put up with, but I think this threatened collapse may be worse.
    It will clarify all matters though.

  5. Why will it be a disaster for the Eurozone if Greece (or any other one country) exits? The opinion seems to be that Greece may leave the euro and that will cause a domino effect causing it to collapse. Why? If leaving is such a bad thing and would cause such hardship, why would others follow? If Greece is seen to be in such dire straits surely others would do their very best to stick to their fiscal plans and stay in? Why will it cause a domino effect if Greece leave? Why will it cause a domino effect if Ireland leave? Why is everyone so afraid of one country leaving? Is it because it may not be such a disaster for that country after all?

  6. I agree with Louise. Greece seems to be an almost impossible country to bail out, and their unwillingness or inability to deal with their indebtedness and expense of running their country is surely a burden to the rest of the eurozone. If they left the euro, maybe this would be seen by the rest of the world as a good thing. Why should this cause a domino effect?The rest of the eurozone are owed billions by Greece, but are they going to get paid anyway? Ireland may be in a bad state, but we are working through our problems, something that I imagine Greece will find hard to do. The eurozone in my view could be better off without them!

  7. The Euro will not collapse, as a last resort they will do what the yanks do, print money. Problem solved.

  8. Websites like this one might not be permitted to exist in the harsh financial winter we face.

    cop on and don’t be so silly

  9. How many multi-national companies are here because we are in the euro? How many are here because of our favourable corporate tax rates and young well educated population and because we speak English?

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