AMSTERDAM, January 18, 2012 /PRNewswire/ --
International credit insurer Atradius N.V. said in a recent economic report, 'Sticking together - The future of the Eurozone', that the consequences of a breakup of the Eurozone would be highly damaging for a country that leaves the euro as well for those that remain within the currency union. A breakup is therefore perceived to be highly unlikely. The costs of a breakup would include an exaggerated decline in GDP, currency devaluations, and inflation in any country that left the Euro. Due to the extensive economic and financial integration within the Eurozone, the impact on countries that remain in the currency union would be severe as well.
Imperative to the success of any plan to rebuild the strength of the Euro and the EMU is the effective address of the fundamental imbalances within the union. High debt levels, trade imbalances and the large differences in productivity growth need to be resolved. Various tools are being employed by the European leaders to address these issues, but the process will be gradual and painful, particularly for periphery member states that will be subject to austerity and reform measures.
Though the road ahead will have ample obstacles the financial implications of a Eurozone breakup would be worse. Atradius believes that the severe consequences of such an outcome provide significant incentive to support the 'sticking together' of the Eurozone,
John Lorié, Chief Economist of Atradius N.V., commented: "We believe that politicians will bring the crisis sufficiently under control in incremental, perhaps grudging, steps. Peripheral countries will put up with austerity and reform. The European Central Bank (ECB) will continue to add its weight by providing necessary liquidity to the banking system. Consequently, tensions in the interbank market are expected to slowly recede and financial market conditions to stabilise. But a recession in the Eurozone, albeit mild, seems inevitable in 2012."
The Atradius Group provides trade credit insurance, surety and collections services worldwide, and has a presence through 160 offices in 42 countries. Atradius has access to credit information on 60 million companies worldwide and makes more than 20,000 trade credit limit decisions daily. Its products help to protect companies throughout the world from payment default risks associated with selling products and services on credit.
SOURCE Atradius N.V.