Let the people eat cake - as long as the bankers and politicians can play god with the Euro.
LIVING STANDARDS MUST FALL BY 15% TO SAVE THE EURO
The euro has only a 20 per cent chance of survival
Friday December 31,2010
By Daily Express reporter Have your say(22)
THE euro has only a 20 per cent chance of survival, a leading think-tank warns today.
It is possible that the eurozone may not even survive next year according to the Centre for Economic and Business Research.
Chief executive Douglas McWilliams said the euro has an 80 per cent chance of failing in its present form in the next 10 years.
He said living standards would have to fall by about 15 per cent in the weaker economies and Government spending slashed if the single currency was to survive.
Mr McWilliams added: “There is no modern history of falling living standards in peacetime on the scale necessary to keep the euro in its current form.
“Indeed the scale of the cuts necessary was only just achieved in wartime. That is why I think there is at best a one-in-five chance the euro will survive as it is.”
The CEBR warned that the financial problems which have crippled Greece and Ireland will spread to other European countries mired in debt.
In a report released today, they say there could be another eurozone crisis in the spring – “if not before” – with Spain and Italy in the firing line.
Mr McWilliams argued that in order for the currency to survive as it is German growth needed to be sustained at more than three per cent for the next four years.
He added that living standards in Ireland, Greece, Spain, Portugal and Italy needed to be drastically cut and Government spending in those weaker countries would have to be reduced by 10 per cent of GDP.
He said there was an outside chance the euro could break up within the year, although this is unlikely because of the political will in France and Germany.
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However he warned that even if the euro survived 2011 it will be the year the currency “weakens substantially” against the dollar.
The report adds weight to the Daily Express crusade for Britain to pull out of the EU altogether.
A deepening of the eurozone debt crisis would hit the UK hard because it exports heavily to the Continent. And taxpayers could be asked to contribute even more cash to struggling countries than the £7billion already pledged towards the bail-out of Ireland.
The report also offered a sombre outlook for Britain, warning that a double-dip recession is “well within the bounds of possibility for the UK” as austerity measures take their toll in 2011.
The stark report comes a day after credit ratings agency Moody’s branded the eurozone the “weakest link” in the global economy.
It said the most vulnerable countries using the euro will be forced to default on debts, despite austere spending cuts.
Moody’s experts said: “Europe remains the weak link, not just because of its sovereign debt crisis but also because even its fiscally stronger states – France, Germany and the UK – are tightening fiscal policy.
“With growth still low this could push the region’s more vulnerable economies into recession.”
Yesterday, the Institute for Public Policy Research also warned that problems within the eurozone would lead to a flood of EU migrants coming into Britain.
Read more: http://www.express.co.uk/posts/view/220339/Living-standards-must-fall-by-15-to-save-the-euroLiving-standards-must-fall-by-15-to-save-the-euro#ixzz19sQL0WDm
The euro stands just a one in five chance of surviving in its current form for ten years, according to the Centre for Economics and Business Research.
As public anger grew over bailouts to Greece and Ireland, several senior European politicians openly questioned the euro's future. Photo: Getty
By Harry Wilson 6:15AM GMT 01 Jan 2011 331 Comments
In its annual list of predictions, the CEBR said a new eurozone crisis was its number one forecast for 2011, citing the hundreds of billions of euros of debt that members must replace this year.
"If the euro doesn't break up, this could be the year when it weakens substantially towards parity with the dollar," said Douglas Williams, chief executive of CEBR.
Spain and Italy alone must refinance more than €400bn (£343bn) of debt in the first half of the year, which could prove impossible given investor fears over the finances of southern European countries.
"The euro might break up at this point, though European politicians are normally able to respond to a crisis and I suspect that what will break up the euro will be the failure of most of the countries to take the tough medicine necessary to make their economies competitive over the longer term," said Mr Douglas.
Mr Douglas added that he was not ruling out another round of government quantitative easing to support the credit markets and prevent a crisis.
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Speculation over the future of the euro reached new heights last year as what been a purely theoretical question became very real during the repeated crises that hit the eurozone in 2010.
As public anger grew over bailouts to Greece and Ireland, several senior European politicians openly questioned the currency's future.
Investors too have become increasingly sceptical, though few predict its imminent demise.
F&C said last month that while the European Union may not continue for much longer in its present form, it was highly unlikley that the euro could be killed off.
"We believe the events of this year will force the EU to introduce tighter controls and greater convergence of fiscal policies," said Rebecca Seabrook, a bond fund manager at F&C.
Japan could also face its own crisis, according to the CEBR, with the possibility of a serious economic crisis in the world's third largest economy rated its fourth most likely prediction.
Debt now equals 200pc of Japanese GDP, but up until now this has largely been financed domestically from the country's vast savings base.
However, the continued growth in Japanese debt means more foriegn financing will be required, according to the CEBR, which could create the conditions for a crisis.
"It is likely that the government will have to embark on fiscal retrenchment. Meanwhile, growth in the Asian export markets will slow and the ageing population will force the government to raise the retirement age again, this time to 75," said Mr McWilliams.
Other CEBR forecasts include predictions of increased lending from UK banks, falling consumer spending, and lower than expected inflation.