The Eurozone crisis continues to escalate despite moves to bring it under control. Now, the possibility of a Eurozone break-up is being seriously considered by some politicians and economic commentators.

But, while allowing struggling countries like Greece to leave the Eurozone may seem, on the surface, to be attractive – freeing them to adopt and devalue their own currencies to become more competitive – this is too simplistic a solution to be workable.

Eurozone member states are firmly linked – economically, financially, and legally through the Maastricht and Lisbon Treaties. An exit by a member state, even if possible, would result in the wholesale withdrawal of investment from that country, causing its banks, businesses and citizens huge problems.

Moreover, the devaluation of a ‘new’ currency, would effectively increase that country’s foreign debts, making the chances of payment more remote. If foreign creditors were to convert euro debts to that ‘new’ devalued currency, the value of their receivables would drop. Either way, all parties concerned would be losers.

The only viable way forward for the Eurozone, tough though it may be, is for its member states to stay together and work through their problems with the tools at their disposal.

Our report ‘Sticking together – the future of the Eurozone' explains in detail the potential outcomes of the options facing the Eurozone and its leaders.
 

 Download the full report

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