Lies and damn lies

6 March 2012 By Peter Thal Larsen Follow @Peter_TL

The IIF puts the price of a Greek default at 1 trln euros. Lombard Street Research reckons the cost of keeping the euro zone intact is even greater. But predicting alternate economic outcomes is subjective. Beyond advancing specific agendas, the exercise has little merit.

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A disorderly Greek default would cause more than 1 trillion euros of damage to the euro zone and could leave Italy and Spain dependent on outside help to stop contagion spreading, according to a confidential document prepared by the Institute of International Finance, Reuters reported on March 6.
The IIF study estimates that Spain and Italy might require 350 billion euros in outside report following a Greek default, while Ireland and Portugal would need 380 billion euros. Meanwhile, the European Central Bank would suffer losses of 177 billion euros on its Greek bonds. Recapitalising banks could cost cost a further 160 billion euros.
A report by Lombard Street Research, prepared for Partij voor de Vrijheid, the Dutch political party that is campaigning for the country to abandon the euro, estimated that the costs to healthier euro zone countries of keeping the monetary union together in its current form would be 1.3 trillion euros by 2015.
The report, published on March 5, estimated that euro zone membership had slowed Dutch economic growth and also suppressed the country’s consumer spending.

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