Sign in. Accessibility help Skip to navigation Skip to content Skip to footer. Become an FT subscriber to read: The terrible consequences of a eurozone collapse Leverage our market expertise Expert insights, analysis and smart data help you cut through the noise to spot trends, risks and opportunities. Join over , Finance professionals who already subscribe to the FT.
Choose your subscription. Trial Try full digital access and see why over 1 million readers subscribe to the FT. For 4 weeks receive unlimited Premium digital access to the FT's trusted, award-winning business news. Digital Be informed with the essential news and opinion. Delivery to your home or office Monday to Saturday FT Weekend paper — a stimulating blend of news and lifestyle features ePaper access — the digital replica of the printed newspaper. Account icon An icon in the shape of a person's head and shoulders.
It often indicates a user profile. Log out. US Markets Loading H M S In the news. Simone Foxman. Sign up for notifications from Insider! Stay up to date with what you want to know. Loading Something is loading. Email address. Deal icon An icon in the shape of a lightning bolt. TFEU Articles , , and invoke the threat of war, serious internal disturbances and other unforeseen contingencies as grounds for overriding Treaty clauses and other legislation, and provide mechanisms for implementing such overrides.
Articles provide a blueprint for how the European Commission, other member states and the European Court of Justice should handle a member state whose actions are not in compliance with the Treaty. This seems tailor made for countries introducing capital controls following an exit from the EMU. Good Will is Essential In the EU, as in life, love normally finds a way around mere Treaty-based and legal obstacles to common sense.
But good will is essential. If a country were to exit in a haze of confrontation and hostility, it is unlikely it would be shown the kind of forbearance that is in principle possible in a consensual exit. In the worst-case scenario, exit from the Euro Area would precipitate exit from the EU.
But Greece like Portugal, Spain and Italy does not have the persistent nominal rigidities found in more Keynesian economies like the US, the UK and perhaps even Ireland that would turn a depreciation of the nominal exchange rate into a lasting competitive advantage. Soaring wage and price inflation, driven by the collapse of the currency itself and by the monetisation of the likely remaining government budget deficit, would quickly restore the uncompetitive status quo.
The official forecast that the Greek general government sector will run a primary non-interest surplus in looks optimistic. A sizeable government deficit would remain to be funded. Monetisation of the remaining deficit through the issuance of a New Drachma, for which there would be very little demand as the Greek economy would remain informally eurosised to a significant degree, may well be the only funding option. Without external funding, imports would collapse, further disrupting domestic production already weakened by collapsing domestic demand.
Aggregate demand and aggregate supply would chase each other downwards. If Greece storms out of the EA, something that has become more likely following the growing political unrest and economic uncertainty and distress in the country, there might be little fear other countries would follow suit. This self-fulfilling fear might force the actual departure of the afflicted country.
A disorderly sovereign default and EA exit by Greece alone is manageable. Greece accounts for only 2. However, a disorderly sovereign default and EA exit by Italy would bring down much of the European banking sector.
0コメント