"...We see no easy way out of the current turmoil. The result of enough fiscal austerity to relieve the debt pressures is a severe recession or depression. Historically, independent nations undergoing austerity have accompanied the policy with monetary ease and a devaluation of their currency. This is something EU members cannot do as they share a common currency and therefore do not run their own monetary policy. Default would cause havoc in the EU banking system that holds a significant share of the sovereign debt. A bailout would require at least two trillion euros, a sum that no one wants to pay. And breaking up the EU would cause major turmoil in global financial markets and economies.
So far the market has rallied strongly on every announced plan for the last year and a half only to decline again when it became clear that the crisis was not over. In our view, a solution is still not in sight. At best Europe will likely fall into a severe and prolonged recession with the potential for major global consequences. At worst, the global economic and financial system could completely unravel, leading to worldwide chaos..."
at http://pragcap.com/euro-crisis-enters-a-dangerous-phase
So far the market has rallied strongly on every announced plan for the last year and a half only to decline again when it became clear that the crisis was not over. In our view, a solution is still not in sight. At best Europe will likely fall into a severe and prolonged recession with the potential for major global consequences. At worst, the global economic and financial system could completely unravel, leading to worldwide chaos..."
at http://pragcap.com/euro-crisis-enters-a-dangerous-phase
