Greece's exit from the eurozone could result in a global economic crisis and affect the US, China and other emerging economies, as well as Southern member states and their EU partners, according to research by Prognos AG on behalf of the German foundation Bertelsmann Stiftung.
Greece’s exit from the eurozone could result in a global economic crisis and affect the US, China and other emerging economies, as well as Southern member states and their EU partners, according to research by Prognos AG on behalf of the German foundation Bertelsmann Stiftung.
The study analysed the financial consequences of different eurozone break-up scenarios and calculated possible declines in growth for Germany as well as for 42 of the most important industrial and emerging countries until 2020.
In this scenario, global top 42 economies would have to absorb total losses for €674bn.
For Greece, the exit scenario would imply national insolvency, a massive devaluation of the new Greek currency, unemployment, sharply declining domestic demand and many other problem and ensuing losses of growth would amount to €164bn or €14,300 per capita by 2020.
In the event of an additional EU secession of Portugal, the loss for Germany would reach €225bn by 2020, with a €99bn debt write-offs.
Globally accumulated losses in growth would add up to €2.4 trillion.
In turn, market uncertainties resulting from a Greek or Portuguese exit would dramatically increase the risk premium by highly debt-burdened economies of Spain and Italy.
The scenario would become much more threatening if an exit of Spain is considered in a new scenario.
If Spain would leave the eurozone, declines in growth in Germany would increase to €850bn by 2020.
This would result in €7.9trillion losses for the top 42 countries included in the research.
In the worst case scenario, according to which Italy would also leave the currency union, Germany would be giving up €1.7 trillion and would have to write off €455bn.
Economic losses in Germany would be €21,000 per capita, higher than for exiting countries.
Greece would lose €15,000 euros, Portugal and Italy nearly €17,000 and Spain €20,500 euros. Another effect would be a dramatic increase of unemployment: considering only Germany, the number of unemployed rise for more than a million by the year 2015, the research found.