La vicenda europea può essere chiarita se la si dispone all’interno di quattro scenari. Il primo è quello che vede tornare tutto al suo posto e pure in fretta. Nel secondo si continua a tentare il ritorno all’ordine, ma poco si ottiene. Il terzo è quello in cui si entra in tensione e non si risolve quasi nulla, salvo evitare che le cose volgano al peggio. Il quarto prevede la rottura dell’area dell’euro. I quattro scenari sono stati ricavati da qui (1) e tagliati e ricuciti in modo che ne emerga la massima chiarezza. Noi pensiamo che oggi si sia nel secondo scenario, ma che si finirà nel terzo, a nostro giudizio il più realistico, anche se non ci piace. Il primo e il quarto li giudichiamo molto improbabili.
1. Order restored
The crisis forces governments to put public finances in order and improve the dynamism and efficiency of their economies. The eurozone becomes an engine of growth in the global economy. Athens is under enormous pressure to rebuild the country’s economy from scratch because the alternative would be catastrophic: likely bankruptcy, isolation from financial markets and widespread social tension. Eurozone politicians could, meanwhile, agree on procedures for preventing future crises. For too long, Greece hid the true state of its public finances. But statistical surveillance is now being strengthened. In future, action could be taken earlier against economic “imbalances” – for instance, when countries lose competitiveness through excessively high wages. Institutions could be created to handle crises in an orderly manner when they do emerge – so, for example, if a debt rescheduling became necessary in, say, Greece, disruption elsewhere would be modest. The ECB would be able to retreat and focus solely on combating inflation.
Likelihood: Not impossible. Implications for the euro: The single currency would become a serious challenger to the dollar as a strong and stable reserve currency.
2. Muddling through
The eurozone stabilises but fails to address fundamental problems in its construction exposed by the crisis. Government and ECB action could calm the current financial market storms. Greece’s credibility with investors could start to be restored as it implements its austerity programme. Spending cuts and tax rises implemented by Spain and Portugal could strike just the right balance between bringing down the public sector deficits and not sending the economy into a downward tailspin. But the changes might not be enough to pep up eurozone growth prospects much. Greece has to cut costs but emulating Germany is not easy. The debate among eurozone politicians today goes beyond ways to manage crises better, and includes ways to ensure such “imbalances” are identified and tackled in good time. It is not clear agreement will be reached, however.
Likelihood: Distinctly possible. Implications for the euro: Weakened growth prospects and exacerbated long-term political worries will pile on the downward pressure.
3. Walking wounded
The demands facing southern European economies could prove too much. Greece might remain hospitalised longer then expected and face a debt rescheduling. Portugal or even Spain might follow. Social unrest could rise to intolerable levels if austerity measures imposed by the International Monetary Fund and EU are not seen to be yielding results. Jean Pisani-Ferry of Bruegel, the Brussels-based think-tank, points out that the combination of poor public finances and uncompetitive industries has proved lethal to nations on Europe’s southern periphery. To restore competitiveness, countries need to “deflate” by cutting wages and prices, “but if prices go down and your debt remains high and the economy shrinks, then the burden of your debt rises”. The risk, Mr Pisani-Ferry says, is that parts of the eurozone become “a sort of Mezzogiorno [southern Italy] or eastern Germany, in which you get no adjustment and high levels of unemployment”. Such a scenario would be highly dangerous for the ECB. The danger is that it would be forced to expand the programme into full-blown “quantitative easing”, in which the inflationary impact is not offset by withdrawing liquidity from other parts of the financial system.
Likelihood: Fair. Implications for the euro: Long-term weakness.
Tensions become too great to manage; one or more countries decide that they would be better off out – or other eurozone countries decide to eject them. Rather than offering an easy way out of the current difficulties as some in financial markets seem to think, a debt default or rescheduling by a eurozone country could unleash unpredictable, destabilising forces across the region. An orderly withdrawal might make sense for eurozone countries that “are fundamentally different from the others”. “Portugal has little to export. They compete with emerging markets so to turn the economy around they would have to cut wages so far that there would be a very deep recession. The same, of course, is the case for Greece.” The problem is that an orderly withdrawal would be hard, if not impossible, to achieve. Most economists also agree the costs of leaving would be huge – whether for a country exiting in disgrace (Greece, say) or by choice (Germany, for instance). Greeks would still face the prospect of paying massive overseas debts in euros, but with a much weaker new drachma; German companies could find themselves priced out of business by a soaring new D-mark. The costs of doing cross-border business would soar for exporters and foreign exchange volatility would become a big obstacle to economic growth.
Likelihood: Remote – but not as remote as previously thought. Implications for the euro: The currency would weaken dramatically well before any break-up loomed.
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