Centre for Economics and Business Research (CEBR) – a leading think tank has warned that the possibility of the Euro surviving beyond the next decade is one in fifth, i.e. 20 percent. The financial crisis seen by Greece and Portugal may spread to other countries of the region in 2011, the institute warned.
The countries which are most likely to be affected next are Italy and Spain, EU’s third and fourth largest economies – behind Germany and France.
Douglas McWilliams – Chief Executive of CEBR said: “We give the euro only a one in five chance of surviving in its present form for 10 years”. The report also warns Britain to brace for a difficult 2011 as austerity measures will start to hurt.
“A double dip for the world economy is not likely because of the strength of the emerging economies, but it is well within the bounds of possibility for the UK” he added.
Matters may get compounded if situation in Europe worsens since EU is UK’s biggest export market. After pledging £7 billion to Ireland’s £72 billion rescue package, British taxpayers may be further burdened by being asked to contribute more to Europe’s Emergency Rescue Fund.
The CEBR predicts “yet another eurozone crisis in the spring if not before” in 2011. Apprehensions are already being expressed about the member countries’ ability to borrow hundreds of billions of Euros cheaply to fund their budget deficits.
Spain and Italy are most vulnerable followed by Portugal, Belgium and even France. Despite the presence of strong political will to save the Euro in Berlin and Paris, it may still split this year.
“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”, McWilliams argued.
Saying the Euro may see substantial depreciation in the coming years, he said: “We give it only a one in five chance of surviving in its present form for 10 years. If the euro doesn’t break up, this could be the year when it weakens substantially towards parity with the dollar”.
The Euro is already down to $1.33 compared to $1.45 a year ago.