WASHINGTON
(MarketWatch) - A decision by a New Greek government to leave the eurozone
would set off devastating turmoil in financial markets even worse than the
collapse of Lehman Brothers in 2008, a leading international economist warned
Saturday.
The exit would also spill into other
countries as investors speculate about which might be next to leave the
currency union, he said.
“In the short run, it would be Lehman
Brothers squared,” Eichengreen warned. He predicted that European politicians
would “swallow hard once again” and make the compromises necessary to keep
Greece in the currency union.
“While holding the eurozone together will be
costly and difficult and painful for the politicians, breaking it up will be
even more costly and more difficult,” he said. In general, the panel,
consisting of four prominent American economists, was pessimistic about the
outlook for the single-currency project.
Jeffrey Frankel, an economics professor at
Harvard University, said that global investors “have piled back into” European
markets over the last years as the crisis ebbed. Now, there will likely be a
repeat of the periods of market turmoil in the region and spreads between
sovereign European bonds could widen sharply.
Kenneth Rogoff, a former chief economist at
the International Monetary Fund and a Harvard professor, said the euro “is a
historic disaster.” “It doesn’t mean it is easy to break up,” he said. Martin
Feldstein, a longtime critic of the euro project, said all the attempts to
return Europe to healthy growth have failed.
“I think there may be no way to end to euro
crisis,” Feldstein said. The options being discussed to stem the crisis,
including launch of full scale quantitative easing by the European Central
Bank, “are in my judgment not likely to be any more successful,” Feldstein
said.
The best way to ensure the euro’s survival
would be for each individual eurozone member state to enact its own tax
policies to spur demand, including cutting the value-added tax for the next
five years to increase consumer spending, Feldstein said.
(Πηγή: marketwatch.com)