A new study by German consulting firm Prognos, commissioned by German think tank the Bertelsmann Foundation, just put a price tag on peripheral countries like Greece, Portugal, Spain, and Italy exiting the euro.
The worst case – all four countries leave, and it costs the world a total of $22 trillion in economic growth.
The study also looks at the ramifications of 1) just a Greek exit, 2) a Greek/Portuguese exit, 3) A Greek/Portuguese/Spanish exit, and 4) an exit by Greece, Portugal, Spain, and Italy.
Here are the results (the table measures losses in euros):
Photo: Bertelsmann Foundation
If only Greece were to exit, the study still estimates a total of $881 billion (674 billion euros) in lost growth worldwide.
If Portugal followed Greece, that would raise the damage to $3.2 trillion. If Spain joined, that number would go to a staggering $10.3 trillion.
However, Italy clearly has the biggest impact. If Italy were to follow the other three, the total lost economic growth worldwide would more than double to $22 trillion.
Here is what the study has to say on the effects of the worst case scenario:
The departure of Greece, Italy, Portugal and Spain from the European Monetary Union would provoke a worldwide recession that would translate into a GDP decline amounting to nearly 17.2 trillion euros in the 42 VIEW states in the lead-up to 2020. In terms of absolute figures, the declines would be the greatest in France (2.9 trillion euros), the US (2.8 trillion euros), China (1.9 trillion euros), and Germany (around 1.7 trillion euros). France would be particularly hard hit by Italy’s sovereign default and exit from the euro, on account of the extensive loans French banks have made to Italy.
The cumulative GDP decline would amount to 154 per cent of economic output for 2013, with Italy alone registering a cumulative GDP loss of around 75 per cent of GDP for 2013. The counterpart figures for Germany, the US and China would be 69, 25 and 49 per cent respectively.
For more on the model used to derive these estimates and the requisite assumptions that went into it, check out the full text of the study. It’s available on the Bertelsmann Foundation’s website >
Business Insider Emails & Alerts
Site highlights each day to your inbox.