Monday, 23 January 2012

Danish economist: Greece and Portugal will leave the euro zone

Money, money, money
Always sunny
In the rich man's world
All the things I could do
If I had a little money
It's a rich man's world

(From the old Abba hit)

Yes, it is all about money. After all the previous rescue packages and bail-outs, Greece and Portugal again need more money. German Finance Minister Wolfgang Schäuble today said that he wanted a second bailout program for Greece, and in Lissabon investors, economists and politicians are convinced that Portugal also will need a second bailout, reports the WSJ.

However, the Chief Economist of the Danish Saxo Bank, Steen Jakobsen is probably more realistic in his forecast:

The euro currency does not work for Greece or Portugal and they will eventually leave the euro zone, an economist told CNBC.

They will leave the euro but stay within the European Union because it is very difficult to leave the EU in terms of security policy and foreign policy. You want to be part of it but only linked to it and that is increasingly what a number of countries want to do," Steen Jakobsen, Chief Economist at Saxo Bank said.
Jakobsen said that some countries within the euro zone would rather be one of the 10 that are currently outside of the zone but form part of the broader 27 countries of the EU.

Jakobsen does not think that a return to the drachma would be catastrophical for Greece:

"First of all there is a significant amount of local money from Greece now positioned in the U.S., Germany and elsewhere. If it was devalued this money would be flowing in and buying utilities, railways and telecom companies. If there was devaluation there could be huge advantages for companies," he added.

Read the entire article here

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