As France and Germany scrabble to save the single currency, the spread of panic to Italy demonstrates that it is increasingly unlikely their effort will succeed.
In this factsheet, Lord Flight examines the possibility of a division of the Euro area into two currencies – a harder Northern European currency, and a weaker version for Southern Europe.
In this note, Flight:
- Argues that Greece, Portugal, Italy and Spain above all, need economic growth to help resolve their deficit and borrowing problems. This they can only achieve by a significant devaluation.
- Suggests that the least painful solution would be a division of the Eurozone into two currency zones
- Asks whether, if Germany refuses to foot the bill to preserve the Euro, is this Germany’s Plan B?