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Greece’s Withdrawal from the Eurozone Could Cause Global Economic Crisis

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Bertelsmann Foundation warns of extensive domino effects

Greece’s exit from the Euro bears the risk of kindling a wildfire throughout Europe and possibly even on an international level and may result in a worldwide economic crisis. Countries affected would include not only Southern European nations or EU members, but also the USA, China and other emerging countries. This was the conclusion reached by a national economic assessment conducted by Prognos AG on behalf of the German Bertelsmann Foundation, which analyses the financial consequences and, for the first time, also possible declines in growth for Germany as well as for 42 of the most important industrial and emerging countries until the year 2020 in the wake of a departure from the Euro by Greece or other crisis-stricken countries. The scenario calculations present the authors of the study with some serious concerns.
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For Greece, the scenario would involve national insolvency, a massive devaluation of the new Greek currency, unemployment, falls in demand and many other problems, effects that will quickly show their mark on its direct trading partners. In the Southern European country alone, the ensuing losses of growth would amount to 164 billion euros or 14,300 euros per person by the year 2020. The 42 top national economies in the world would already have had to absorb total losses amounting to 674 billion euros in total.

However, since it is not possible to eliminate the potentially massive ramifications that Greece’s exit from the Euro would entail for other Southern European crisis-ridden nations, the calculations were extended to include these scenarios. For example, in the event of the additional exit of Portugal from the Eurozone, this would mean a loss of 225 billion euros for Germany by 2020 and necessary debt write-offs of 99 billion euros. Globally accumulated losses in growth would add up to 2.4 trillion euros at this point, of which the USA would be hit with 365 and China with 275 billion euros respectively. With this scenario, per capita losses in income in Germany would total 2,790 euros over eight years.

“We must now be absolutely sure of preventing the conflagration from spreading in the current situation”, warns Aart De Geus, Chairman and CEO of the Bertelsmann Foundation’s Executive Board. The market uncertainties brought about by the Greek or Portuguese departures would harbour the danger of drastically increased risks for the already highly debt-burdened economies of Spain and Italy, so that a further erosion of the Eurozone would be inevitable. The European Solidarity Group would find it virtually impossible to deal with even the burdens incurred to the countries themselves by their departures, according to De Geus.

But the scenario would become even more dramatic if Spain’s exit were to be taken into the equation. If Spain were to leave the Eurozone as well, declines in growth in Germany would increase to 850 billion euros by 2020, with outstanding debts of 266 billion euros being waived. In the USA, it would mean a loss of growth to the extent of 1.2 trillion euros and in the 42 countries under review it would result in losses of 7.9 trillion euros. Even the accumulated per capita losses would soar upwards in this scenario. The result would be a loss of 10,500 euros per capita over eight years by 2020 for Germany, a loss of 3,700 euros in the USA and as much as 18,200 euros in France and 16,000 euros in Spain respectively.

The situation would spiral totally out of control if the Euro crisis were to reach the point where Italy would also have to leave the Eurozone: Germany would be giving up 1.7 trillion euros and would have to write off 455 billion euros. Here economic losses in Germany with more than 21,000 euros per capita would in some cases be even higher than in the exiting countries Greece with more than 15,000 euros, Portugal and Italy with nearly 17,000 euros as well as Spain’s 20,500 euros. The result would be increased unemployment for the population: the number of unemployed in Germany alone would rise to more than a million by the year 2015.

This scenario would eventually lead to a dramatic international recession and global economic crisis. By 2020, growth losses in the countries under review would reach a total of 17.2 trillion euros. In absolute terms, losses suffered would be the highest in France at this point (2.9 trillion euros), in the USA (2.8 trillion euros), in China (1.9 trillion euros) and in Germany with roughly 1.7 trillion euros.

In their overall appraisal, the authors arrived at the following conclusion: an initially isolated exit by Greece and its national insolvency may well be something that could be dealt with from an economic point of view, but the effect would be that the global economy would be thrust into a deep recession as their impact is difficult to calculate, and the recession would not stop even at economies outside Europe.

In addition to the purely economic consequences, considerable social tensions and political instabilities must be taken into account – primarily in the countries exiting from the European Union, but also in other economies. The danger of kindling a wildfire with all the economic and political consequences, as well as the social follow-on effects of a Greek national insolvency and exit from the Euro present a threat which the international community of states should attempt to prevent at any cost – even outside of Europe.

About the study: The calculations are based on Prognos AG’s econometric VIEW model, which is able to reproduce the national economies of 42 industrial and emerging economies on the basis of empirical data over an extensive period of time and in great detail. For comparison purposes, uniform exit assumptions or estimates were used to calculate the exit costs of the four countries. Thus, for all countries a debt average of 60 per cent was assumed for private as well as public debtors and a 50 per cent devaluation of the newly introduced currencies in the exit countries was compared with the euro.

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For any questions please contact:

Dr. Thieß Petersen
Tel. +49(0)52-41-81-81218 E-Mail: thiess.petersen(at)

Dr. Ulrich Schoof
Tel. +49(0)52-41-81-81384 E-Mail: ulrich.schoof(at)


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