The destruction of the Euro is necessary - it's the best chance we have of destroying the EU. Let's be clear, no amount of Euro-plastic tinkering is going to make any real difference. The colleagues are all-out for political integration, only the collapse of the Euro can stop that. They've already beggared Greece for generations, and they have no qualms about doing the same to the rest of us. For the Euro-class, economic destruction across the continent is a small price to pay to make sure the 'project' succeeds.
However, what's the likely cost of a Euro collapse? To pretend that because we're not in the Euro we have any real insulation is a fantasy. It's going to hurt like hell.
According to economist Danny Gabay, an economist at Fathom Consulting (quoted by the Economist ), we can expect:
Our simulation implies that the impact of a disorderly euro break-up on the UK will be roughly half as bad again as the collapse of Lehman Brothers.The UK economy contracts by over 7% between now and 2013, assuming a euro default in early 2012.In other words we're talking major recession again. It's time our political class started to prepare for this, but Osborne and the Office of Budget Resposibility are decidedly looking the other way. Can anyone really believe that public debt is not going to sky-rocket above the magic 80% figure when all this goes off?
Moreover in the absence of massive monetary easing to prevent sterling from rising by upwards of 35%, we see the UK slipping into deflation, which would make servicing its debt even harder. And you can forget those fiscal targets, In our simulation, the austerity measures are simply overwhelmed by the impact such a huge sovereign default event has on global bond yields. Even with austerity, we see UK bond yields rising above 10% by 2013.
If there was ever a perfect time to seriously cut back on climate change spending, the endless layers of quangos (still largely untouched by the promised 'bonfire') and pointless foreign adventures, it's now.
Update: It looks like things are hotting up, with the latest spate of announcements from Mervyn King et al. Meanwhile, there are more important things to think about... Like the faux outrage over Jeremy Clarksons comments.