A doomsday scenario for the euro
The European flag flatters in the wind past the headquarters of the European Central Bank in Frankfurt am Main, Germany.
Jeremy Hobson: As Italian borrowing costs reached another record high this morning European finance ministers are meeting in Brussels. They're trying to figure out a way to avoid a collapse of the euro. The big ideas out there at the moment involve more unity for the 17 member nations. But some think it may all be too little, too late.
Johan Van Overtveldt has just written a book ominously titled "The End of the Euro." He joins us now from Brussels. Good morning.
Johan Van Overtveldt: Good morning over there.
Hobson: Well you write that there are two ways that the European debt crisis could play out, one of which would be that they would form a full-fledged political union -- maybe something like the United States of Europe -- or the other way, "the whole thing unravels."
Van Overtveldt: Exactly. These are the two options that are before us today.
Hobson: And what do you think's going to happen?
Van Overtveldt: Well as things stand now, things are moving more and more in the direction of a blow-up of the eurozone.
Hobson: So lay out your doomsday scenario for us: How would it unravel?
Van Overtveldt: Well, we keep on going with this piecemeal approach too little too late, we put together rescue packages for the countries in difficulties. But the costs of these things mount and mount, and at the end of the day, it will be only the Germans -- which is, at a matter of fact, the biggest economy and also the economy with the deepest pockets -- that will have to pay the bills. And within one or two years, that would become too much even for the Germans, and then it will be them who decides to leave the eurozone.
Hobson: What is at stake for the global economy if we lose the European monetary union as it exists today?
Van Overtveldt: Two scenarios here: If the thing goes down the drain -- if I may put it that way -- in a chaotic way, that would of course put a huge break on economic growth all over the world. That means also trouble for the United States and certainly for countries like China and India, who both have a lot of exports toward this area. The other scenario is, of course, that is the breakdown happens relentlessly smoothly, and then of course, per definition, the impact on the rest of the world would also be much smoother.
Hobson: Finally, if your dire situation is to come true, when's it going to happen?
Van Overtveldt: Well, if I would know that, I would be in Bahamas on the beach.
Hobson: Dr. Johan Van Overtveldt, author of the book, "The End of the Euro." Thanks so much for talking with us.
Van Overtveldt: Thank you.