The Uncertain Future of the Euro

20/12/2011

Is it possible to have a "euro of the North" and a "euro of the South"? IESE Prof. Javier Díaz-Giménez discounts this idea, warning that once a country leaves the euro zone, other states would likely follow suit.

The survival of the euro remains a question mark, he says in this interview, since many critical problems have not yet been solved, such as the issues of solvency of Greece and Ireland and a lack of liquidity in Spain and Italy.

Nevertheless, Europe remains a heavyweight in the global economy, reflecting 22 percent of the world's PPP, so whatever happens in the region will undoubtedly have an impact on the rest of the world. Indeed, the disappearance of the euro could lead to a "catastrophic" situation, he says, in which depressed demand and low growth would have a negative impact on non-euro countries that export to the region.