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Eurozone may collapse this year, says CEBR

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  • 03/01/2012
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Eurozone may collapse this year, says CEBR
The eurozone could start to break apart this year with countries including Italy and Greece potentially exiting the single currency, a leading think-tank has warned.

While the single currency marked its tenth anniversary this weekend, the Centre for Economics and Business Research (CEBR) warns there is a 99% chance it will not survive the next 10 years.

According to the Telegraph, the CEBR said the eurozone would likely start to break apart this year, having barely managed to retain all its member states in 2011 after the crises in Greece, Italy and Spain.

“It now looks as though 2012 will be the year when the euro starts to break up,” the CEBR said.

Douglas McWilliams, CEBR chief executive, added: “It is not a done deal yet – we are only forecasting a 60% probability – but our forecast is that by the end of the year at least one country (and probably more) will leave.”

He said of all the member states, Greece seemed “pretty certain” to leave the euro, while it now looked “more likely than not” Italy would follow suit.

Both countries have been rocked by the debt crisis, with government bond yields soaring to unsustainable levels during 2011. Subsequent austerity plans designed to tackle the problems have been greeted with public anger in Greece.

“It’s become clearer in the last year of the virtual political impossibility of doing the deal that would be necessary to make the euro survive,” said McWilliams.

“To make the euro survive in the longer term, it needs countries to be sufficiently competitive to have some economic growth to be able to pay off their debts”.

He added that a lack of economic growth to improve the debt position had been “the most likely thing that will eventually make the euro collapse; now it’s pretty well certain that it will”.

The think-tank added Britain could well be in recession already, with growth likely to contract in the final quarter of 2011 and the first quarter of 2012.

 

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