What next for Eurozone?
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Potential outcomes for 2012
Monetary expansion through a liquidity injection from the European Central Bank, orderly defaults for the most indebted countries, Greek exit and a new currency bloc have been outlined as four potential outcomes of the Eurozone crisis in 2012, in a PwC report launched today, "What next for the Eurozone - Possible scenarios for 2012". The report analyses each of these scenarios and outlines the outcomes of each in terms of the potential Eurozone inflation and GDP impact over the medium term.
Expect surprises next year. We are currently experiencing unprecedented levels of uncertainty in the Eurozone. The potential political and economic outcomes emerging from the Eurozone crisis in 2012 are disparate, although all share a similar theme. A harsh adjustment to a new fiscal reality will be unavoidable, regardless of the path politicians decide to follow.
We expect these scenarios to have an impact well beyond the Eurozone; countries like the UK and US are likely to see falls in exports and banking sector problems but possibly also increased levels of capital inflows, as investors look to place a larger proportion of their portfolios in 'safe haven' markets. Other countries, like China, will have to deal with a decline in a significant proportion of their export markets.
For further consideration of the political and economic impact of these scenarios to the large European economies and a selection of other smaller economies, please see our Eurozone Economic Views report and webcast .
