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A Grexit could cost the world €17.2 trillion

According to a German think-tank a Greek exit from the Eurozone could spark a ‘wildfire throughout Europe’ and could force Italy, Spain and Portugal to leave the single currency bloc.

The Bertelsmann Stiftung think tank said; “A Greek exit on its own would imply national insolvency, a massive devaluation of the new Greek currency, unemployment, sharply declining domestic demand and many other problems. All these domestic effects would have a direct impact on its trading partners. In Greece alone, the ensuing losses of growth would amount to €164 billion by the year 2020. The top 42 national economies in the world would have to absorb total losses amounting to 674 billion Euros in total.”

Adding to its gloomy view the think tank goes on to outline the consequences of Portugal being forced to leave.

It says; “In the event of an additional secession of Portugal, it would mean a loss of €225billion for Germany by 2020 and necessary debt write-offs amounting to €99 billion Euros. Globally accumulated losses in growth would add up to €2.4 trillion at this point, of which the USA would have to bear 365 and China €275 billion respectively. With this scenario, per capita losses in income in Germany would total 2,790 Euros over eight years.”

It also describes a truly apocalyptic scenario where Italy and Spain were forced out. According to Bertelsmann Stiftung; “The situation would totally run out of control if the Euro crisis were to reach the point where Italy would have to secede from the Eurozone as well. Germany would be giving up €1.7 trillion and would have to write off €455 billion. In this scenario economic losses in Germany with more than €21,000 per capita would be even higher than in the exiting countries: Greece would lose €15,000 per capita, Portugal and Italy nearly €17,000 and Spain €20,500. Another effect would be a dramatic increase of unemployment: only in Germany the number of unemployed rise for more than a million by the year 2015.

This scenario would eventually lead to severe international recession and global economic crisis. By 2020, growth losses in the countries under review would reach a total of €17.2 trillion. In absolute terms, France would suffer from the highest losses at this point (€2.9 trillion), followed by the USA (€2.8 trillion), China (€1.9 trillion) and Germany (€1.7 trillion).”

Let’s hope that French President Francois Hollande’s comments in an interview with a German newspaper are true when he says that the Eurozone is close to ending the crisis. If it hasn’t and Stiftungs prediction ever came to pass then the world would be in serious trouble.

As of 14.35 pm:

The Pound to Euro exchange rate is currently trading at 1.2320

The Pound to US Dollar exchange rate is currently trading at 1.6153

The Pound to Australian Dollar exchange rate is currently trading at 1.5619

The Euro to US Dollar exchange rate is currently trading at 1.3107

The Euro to Pound exchange rate is currently trading at 0.8113

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