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Eurozone scenarios from best to worst

Last Updated: Dec. 9, 2011

On Dec. 9, the leaders of the 17 countries that use the euro, plus six others, agreed to a new treaty that would introduce tighter budget rules seen as essential to holding the currency bloc together. Britain, however, was one of four holdouts. Based on the opinions of some highly respected economic minds, here is a range of potential outcomes for the future of the eurozone, from best to worst.

Hover over the blue euro symbol to read the full details for each outcome. Move from left to right for possible scenarios in the developing eurozone crisis.

An agreement is reached

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European leaders reach a settlement that could, for example, make the European Central Bank the lender of last resort, or establish a treaty that gives Brussels the authority to approve national budgets.

Organized break-up of eurozone

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The countries of Europe all agree to return to their national currencies. The transition is bumpy, but with some tinkering (e.g. tax cuts), countries manage to revive their economies. As Richard Wellings, an economist at the Institute of Economic Affairs, told the International Business Times UK, "it needn't be a chaotic process leading to anarchy."

Southern countries leave eurozone

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One scenario sketched out by Vivien Schmidt in Foreign Affairs magazine sees the countries of southern Europe leaving the eurozone, but with a "modern-day Marshall Plan funded by… the richer eurozone members." The upside for the southern countries would be increased competitiveness; the downside, inflation and most likely a decimated banking system.

Northern countries leave eurozone

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Another scenario laid out in Foreign Affairs magazine involves the richer northern countries breaking off and forming a new currency.

End of eurozone

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Mark Cliffe, global head of financial markets research at ING, told the Guardian newspaper in London that if the countries of Europe all return to their native currencies, the Irish punt and Italian lira would sink 25 per cent against a new German mark. He predicted the Spanish peseta and the Greek drachma would lose 50 and 80 per cent, respectively.

End of EU

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Historian Niall Ferguson has said that the political rancour over sovereign debt is more likely to lead to the break-up of the European Union than a collapse of the Euro.

Riots

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A senior minister in the British government told London's Daily Telegraph that his country is preparing plans to protect expats in the eurozone in the event that a currency collapse leads to riots.

Armed conflict

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According to a report by Swiss bank UBS, "No modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war."

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