The eurozone’s sovereign debt-saga seems to be a never-ending story. But like all financial crises, it will end at some point. Will the endgame involve a default of one or more eurozone countries? Would that lead to a partial or full break-up of the eurozone? Overall, what could be the consequences for the eurozone economy?
Regarding a possible default by a eurozone member state, it is worth noting that this would not be the first time in modern history when only part of the state sector unit using the same currency is confronted with default. A notable example (from the other side of the Atlantic, as it happens) is New York City in 1975. President Gerald Ford at first refused a bail-out, an attitude characterized by a Manhattan tabloid with this headline: “Ford to City: Drop Dead”. Ultimately, both the federal government and the New York state government provided loans – and New York City survived, revived and prospered (albeit under strict budgetary supervision by the lenders) without permanent damage to the U.S. currency or the national economy.
Πηγή: Bruegel