Thinking the unthinkable -- a eurozone "divorce"

The 'Europe' sculpture of Belgian artist May Claerhout showing a woman holding up the symbol of the Euro stands outside the European Parliament building on Nov. 17, 2011 in Brussels, Belgium.

Kai Ryssdal: So let's say the bond markets really get fed up? Push comes to shove, and the eurozone breaks up -- calls it quits. Whaddya suppose that would look like?

Something like a real life divorce, it turns out: Messy for the spouses, and the damage wouldn't stop there. Marketplace's Sarah Gardner reports.


Sarah Gardner: Back in the '90s, there was a bestselling book called the "The Good Divorce." It was all about achieving orderly, civilized breakups.

Well, don't expect that if the eurozone splits up.

Sebastian Mallaby: A breakup of the eurozone would be extremely painful and extremely messy.

Sebastian Mallaby is a scholar at the Council on Foreign Relations.

Mallaby: Every single business contract in Europe is denominated in euros, and if you throw that currency out of the window, you're going to have sort of monetary pandemonium.

Pandemonium and loss, says Domenico Lombardi, an economic policy specialist at the Brookings Institution.

Domenico Lombardi: Many countries would experience substantial devaluation in their own currencies.

Countries like Greece and Italy. They'd fall back on their old pre-euro currencies and could even face bankruptcy. Sebastian Mallaby says like in any divorce, there'd be no real winners -- richer family members like Germany would feel heartache too.

Mallaby: Because, you know, their economic model has been based on exporting to those other European economies and those exports will take a hit.

And they've lent to all those poorer relatives too.

Mallaby: And all those loans they've been making for the last decade will now not be paid back.

The trouble would extend beyond the family too. Neighbors would get sucked in, like the U.S., as European banks dump U.S. stocks and bonds to raise money so they can stay afloat. Marriage counselors would call that 'the damaging ripple effects.'

I'm Sarah Gardner for Marketplace.

About the author

Sarah Gardner is a reporter on the Marketplace sustainability desk covering sustainability news spots and features.

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