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Here’s a piece of research from September that should scare the crap out of everyone in Greece.Earlier this morning, CNBC’s Jackie DeAngelis referred to a UBS report arguing that Greece leaving the euro would cost it half of GDP.
We’re pretty sure she’s referencing this September 6 report from UBS economists Stephanie Deo, Paul Donovan, and Larry Hatheway.
Here’s an excerpt via Libération:
The cost of a weak country leaving the Euro is significant. Consequences include sovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance. We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.
The report also presents a scenario should a country like Germany make an exit.
Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade. If Germany were to leave, we believe the cost to be around EUR6,000 to EUR8,000 for every German adult and child in the first year, and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is the equivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of those countries would be a little over EUR1,000 per person, in a single hit.
See Also — GREECE: This Is What Comes Next >