European Union: Four nightmare scenarios for the EU

4 May 2010 – Presseurop Profil

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"Has Europe run out of steam? – No. Not unless Spain, Portugal and Italy are drawn into the crisis)." Profilreports that divergences in agency ratings or GDP debt ratios could emerge as fault-lines in a future two-speed Europe. According to the Austrian weekly's analysis: risk one, the collapse of one of the larger PIGS (Portugal, Italy and Spain) where the accumulation of debt is outpacing economic growth, could prompt a shake-up that would result in a split in the euro or even the EU. Evidence of weakness in these countries could play a pivotal role in triggering risk two: an illegal but nonetheless possible attack by speculators gambling on the probablity that an EU state will become insolvent, which can only be countered by the establishment of a European ratings system. According to experts cited by the weekly, risk three — German withdrawal from the euro — remains unlikely in view of Berlin's enduring commitment to the single currency. However, risk four — the absence of a European mechanism to regulate financial crises — will remain until national governments review their selfish objections to politcal and fiscal harmonisation within the eurozone. Without a common economic policy, Profilbelieves that the eurozone will eventually be replaced by an "E-Mark" area formed by the stronger EU economies, which would put an end to the European project as we know it.

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