Theoretically,.. what if the Euro collapses.
Photo Credit Reuters
The countries that would suffer first and foremost would be the eurozone’s weak countries — the same ones whose governments’ over-borrowing has sparked the now two-year-old euro crisis.
The well-known commercial bank UBS recently estimated that the costs of leaving the eurozone for a weak country would be equivalent to 9,500 to 11,500 euros ($12,800-$15,500) per person in the first year. That equates to a range of 40 to 50 percent of the country’s gross domestic product (GDP).
Those high costs would come as the country leaving the eurozone switched back to a national currency and printed money to pay its debts and public-sector wages. The new currency would be devalued in its purchasing power compared to the former euro because people would have little confidence in it and price inflation would almost certainly follow.
Panos Tsakloglou, a political economist at Athens University of Economics and Business, says that initially the living standards of a country like Greece would decline dramatically.
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