Estimated Cost of Eurozone Break-up a Shocking $22.0 Trillion
The financial crisis in the eurozone has continued for some time, and there is still no end in sight. What was once perhaps a nice theory on paper is currently crumpling under the strains of reality. It’s still a surprise to me that the founders of the eurozone did not realize the possibility of a financial crisis and the importance of having a fiscal union to go along with the monetary union. I’m sure every person knows that they shouldn’t cosign a loan with someone unless they can trust in that person’s ability to repay their debt. Instead, the eurozone has essentially given a blank check to the weaker nations, specifically the PIIGS—Portugal, Ireland, Italy, Greece, and Spain.
With this financial crisis unfolding, many are surprised that the eurozone is still holding together. So the question is: why would the wealthy northern part of the eurozone continue to support the poor and fiscally irresponsible countries during this financial crisis? Why not just break up the union? It appears that the costs associated with breaking up the eurozone might be far higher than most people realize. In fact, perhaps the eurozone members themselves know the true costs and are thus willing to throw in hundreds of billions of dollars to prevent the loss of trillions.