Eurozone Debt Crisis - What are your predictions on how this crisis Essay

Eurozone Debt Crisis - What are your predictions on how this crisis will develop in the second half of 2011 and what impact will - Essay Example Soon after this optimistic representation of the future global economy, Greece made headlines, where the investors started asking if it would be ever possible for the country to â€Å"pay off the ?259 billion in government debt it currently owes’ (Khan, ibid). Soon Ireland and Portugal followed suit, while predictions show bad signs for Spain and Italy (Lucas, Find Safe European Stocks out of Unsafe Europe , April 2011). Thus, we find that Euro has taken a deep battering from the start of the new decade, with widespread fears that this economic crises may lead to the break-up of the Eurozone. Discussion In recent news published, we find that it presents gloomy figures, â€Å"The Eurozone crisis has gone from bad to worse as debt contagion threatens to engulf Italy. With analysts predicting that Britain could lose as much as ?43 billion should the Italian economy fold, Chancellor George Osborne called on his Eurozone colleagues to take "decisive action" before the situation g ets any worse. He also warned that Britain was "not immune" from the crisis† (Clarkson, Q&A: How will the latest eurozone crisis affect the UK? 2011). Thus, we find that the economic recovery has again hit a critical roadblock, where the economist Peter Spencer on 18th July 2011 stated, "The risks to the world economy and the Eurozone are plain to see, starting with the Greek default, threatening a domino effect on Portugal and Ireland, followed perhaps by Spain and Italy"(cited in, skynewsHD, July 2011). In review by the Ernst & Young group, we find that the predictions are not very optimistic for the second half of the year. In this report, it is stated that the economic forecasts show every indication of an increasing â€Å"EU sovereign debt crisis† (Ernst & Young Eurozone Forecast, 2011, 4). The review also shows that it is almost impossible to avoid the non-payment of the debt incurred by the Greece government. Similarly it would be also impossible to frame an econ omic restructuring, and in probability the country would require another bailout loan. However the review further adds that â€Å"a restructuring nor a bailout are in themselves likely to provide lasting solutions and restructuring would almost certainly carry in its wake the necessity of similar exercises for Ireland and Portugal. An additional uncertainty is whether debt restructuring comes via an orderly or disorderly process. If it is the latter, the risk of contagion to other countries increases and the Eurozone’s reasonably healthy growth prospects for 2011 and 2012 are likely to be extinguished. In fact, the economy would go backward† (ibid). Fig 1: The table below shows GDP growth rates for the European Union and select individual countries. Here we find that the 2011 and 2012 growth predictions vary from 4-5% for countries like Turkey and Poland, and an average of 1-2% for the PIIGS countries at the other end (Source: Lucas, 2011). The graph shows a picture wh ere we find that majority of the countries perform badly (economically) in 2011, with indications of a slightly better show in