The OECD is an international organization: the Organization for Economic Co-operation and Development. It is not given to wild predictions. Recently, it issued a report that said this:
If everything came to a head, with governments and banking systems under extreme pressure in some or all of the vulnerable countries, the political fall-out would be dramatic and pressures for euro area exit could be intense. The establishment and likely large exchange rate changes of the new national currencies could imply large losses for debt and asset holders, including banks that could become insolvent. Such turbulence in Europe, with the massive wealth destruction, bankruptcies and a collapse in confidence in European integration and cooperation, would most likely result in a deep depression in both the exiting and remaining euro area countries as well as in the world economy.
Got that? “Deep depression.” This is frightening language. I see this as a form of pressure on Europe’s politicians to implement an unconstitutional reform: fiscal union, and also for the European Central Bank to inflate. But the European economy will collapse if things continues as they have been for the last 18 months. The author does not predict this, but he says it’s possible. He clearly expects the reforms.
What is the OECD’s overall assessment? There will be a European recession.
