10/17/2012 01:38 PM
Euro Exit by Southern Nations Could Cost 17 Trillion Euros
A new study by a German think tank warns that a euro exit by Greece, Spain, Portugal and Italy would cut global GDP by 17 trillion euros and plunge the world into recession, with France suffering the biggest loss. A Greek exit alone would be manageable, but must be avoided to forestall a domino effect, it says.
A Greek euro exit on its own would have a relatively minor impact on the world economy, but if it causes a chain reaction leading to the departure of other southern European nations from the single currency, the economic impact on the world would be devastating, a German study warned on Wednesday.
Economic research group Prognos, in a study commissioned by the Bertelsmann Stiftung, estimated that euro exits by Greece, Portugal, Spain and Italy would wipe a total of €17.2 trillion ($22.3 trillion) off worldwide growth by 2020.
• If Portugal went, Germany would lose €225 billion by 2020 and would have to write off credit amounting to €99 billion. Global losses in growth would add up to €2.4 trillion, with the US having to bear €365 billion and China €275 billion, respectively.
• If Spain were to go as well, Germany would lose €850 billion in GDP by 2020 and would have to waive €266 billion of credit. The US would lose €1.2 trillion in GDP, and the 42 countries under review would lose €7.9 trillion.
• If Italy, the euro zone's third largest economy, were to leave, "the situation would run totally out of control," the study said. It estimated that Germany would lose €1.7 trillion in GDP and would have to write off €455 billion in credit. German unemployment would increase by more than one million by 2015. There would be a "severe international recession and global economic crisis," the Bertelsmann Stiftung writes.
The biggest losers would be France, followed by the US, China and Germany.