Anyone who leaves the euro enters a valley of tears. Those prophesied by UBS are scenarios of economic armageddon, which in its latest study starts from a simple question: what would happen if any country in the Eurozone decided to abandon the single currency? The answer is equally simple: it would be chaos. Yet in recent days many such assumptions have been made to put the Greek problem aside and leave Athens to its personal oblivion.
The latest proposals in this sense have come from some representatives of the Dutch and German governments, but the European Commission she immediately hastened to categorically reject the idea. “Participation in the euro is irreversible and irrevocable. There are no discussions whatsoever on this eventuality”, cut short Olli Rehn, EU commissioner for economic and monetary affairs. And he was right. Let's see why.
According to Swiss Bank analysts, if today a peripheral country of the euro area returned to the old national currency (lira, drachma, peso or whatever) it would face a devaluation well above the 20% forecast so far. The value of outdated banknotes and coins would be 50-60% lower than that of the euro. A godsend for exports? Far from it. The advantages would dissolve in no time, engulfed in a terrifying chain reaction. The defaults would fall on top of each other like dominoes. The first to succumb would be government bonds, closely followed by corporate bonds.
The reason is trivial: any debt security issued in euros would always and in any case remain denominated in euros. Repaying the capital would thus become a chimera, let alone the payment of interest (which would continue to rise). Investors would then put a big black cross on the country, which would therefore no longer be able to place new securities on international markets. All this, just in the first year of the nightmare, would cost every citizen something like 10 euros.
So far the consequences for peripheral countries such as Italy, Greece or Portugal. But the scenario would not be much more reassuring if a strong economy were to leave the Eurozone. Let's take the most solid of all, Germany. Even the German locomotive would have to watch helplessly as its international trade collapsed. Industry would collapse and the banking system would need a generous recapitalization. In terms of costs, this would mean between 3.500 and 4.500 euros per citizen, for an overall impact equal to a quarter of GDP. Saving three of the infamous Pigs (Greece, Ireland and Portugal) would instead cost around 1.000 euros to every German. In short, "the 'popular' discussion about the possibility of leaving the euro greatly underestimates the consequences", to quote Ubs.
