A euro exit by the region’s weakest members — Greece, Spain, Portugal and Italy — could be contagious and devastating to the rest of the world. The result would catapult the world into a recession and chop $22.26 trillion out of global gross domestic product by 2020, according to a new German think tank study.
A Greek exit alone could be managed successfully, but should be avoided lest it cause a domino effect that would drag in the others, the study, which was commissioned by the Bertelsmann Stiftung Foundation, warned.
The cost to the United States alone of Greece exiting the eurozone would be about $122 billion, the study concluded.
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Spiegel Online said the researchers arrived at their grim assessment by calculating the potential losses of creditors who have backed the four struggling southern eurozone nations, plus the knock-on effect of a euro collapse on economic growth in the 42 largest developed and emerging economies of the world. Those 42 countries make up more than 90 percent of the world economy.
"In the current situation we have to make sure that the crisis in Europe does not turn into a wildfire," said Aart De Geus, CEO of the Bertelsmann Foundation's executive board.
If the worst-case scenario of all four nations exiting the euro occurred, the study estimated France would suffer from the highest losses ($3.81 trillion), followed by the United States ($3.64 trillion), China ($2.49 trillion) and Germany ($2.23 trillion).
The International Monetary Fund (IMF) warned last week that European banks might be forced to sell as much as $4.5 trillion of assets unless the Eurozone sovereign debt crisis is resolved, the German news agency DPA reported.
The IMF warned that capital is already fleeing from troubled nations such as Spain and Italy into more stable European nations or out of the eurozone altogether.
The bleak picture was not shared everywhere in the Europe, however. French President Francois Hollande said in an interview with European newspapers that EU leaders had already established the groundwork for a recovery by making commitments to cut the region’s deficits and debt levels.
“On the exit from the eurozone crisis, we are very, very close,” Hollande claimed.
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