This is serious language coming from Centre for Economics and Business Research (CEBR). They basically have told Greece that if they don’t leave the European Monetary Union, drop the Euro as their currency and devalue the new Greek currency, they would not escape this “debt trap” as they referred to it. First off, telling a country that default is their best option is very strong language for any experts to use when they are talking about a countries bonds. Once this new currency is put into effect, they are calling for a immediate 15% devaluation to get Greece back on track.
They just underlines the dire situation in the Euro zone right now. It looks like the contagion has spread to Spain as well. Spain lost their “AAA” credit rating last week as well. Now that this investment-grade status is gone, we will see investors start to hammer their debt as well by slowly driving up their interest rates they will need to pay to finance their debt. Not too mention Portugal and Ireland are also in the cross-hairs of the bond vigilantes.
This does not bode well for the Euro, it is still near its lows and with news like this, it will most likely make more lows before it gains in value. I am looking for the Euro Zone to prune its currency of the weakest countries if they intend to keep a Euro viable as a currency.
The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.
Greek politicians have played down the prospect of abandoning the euro, which could lead to the break-up of the single currency.
Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR, said: “Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.
Analysis: Euro is on its last legs and if they don’t do something dramatic, we will be reading about maybe a country like Germany or France dropping out and they would be the last nail in the Euro’s coffin.