Recession in eurozone could trigger widespread sovereign defaults

Prof Philip Booth comments on the continued eurozone troubles

Commenting on the latest Eurozone Forecast report from Ernst & Young suggesting that Greek default is inevitable, Professor Philip Booth, Editorial Director at the Institute of Economic Affairs, said:

"Greek default has been inevitable for some time. However, the important point about this report is that it suggests that there is a high chance of the eurozone slipping back into recession. If this happens there is a real likelihood of further sovereign defaults and the European Financial Stability Fund may then be in danger of being unable to meet its obligations. According to the proposals currently being discussed within the EU, the burden will then fall to the ECB.

“A recession and further sovereign defaults would lay bare the inadequacies of this mechanism of parcelling up EU sovereign debts into packages that are ultimately partially guaranteed by the very countries in danger of defaulting! The consequences for the ECB could be disastrous.”

 

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