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Tuesday, April 05, 2011

The Sinking Euro Ship

The Economist Intelligence Unit has issued a report which states that there is a one in seven chance that Europe's ongoing debt crisis will cause member nations to abandon the Euro.

However, the report manages to muddy the waters by also stating that there is a 50% probability that the eurozone will get through the crisis.

Given how close to economic meltdown some member states (eg Ireland, Spain, Portugal and Greece) are, and that the wealthy states (eg Germany) are thoroughly fed up with propping them up I would suggest that the one in seven probability is massively understated.

It should also be noted that the ECB is likely (despite all reason and commonsense dictating that it shouldn't) to raise interest rates this Thursday. Any increase in rates will worsen the economic situation, and make it even more likely that member states will abandon the ill fated Euro experiment.

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