The outlook for Europe May 2012

The coming 2/3 months look decisive for Europe, against the backdrop of recession in eight EMU member states and rapidly growing popular discontent.

What are the main scenarios?

Best Case – Europe adjusts its policies and sucessfully ringfences the problems in Greece, allowing the current investor panic to subside while the Euro economy gradually recovers later this year, led by a strong Germany.

Bad outcome – Greece leaves EMU causing a major shock to markets but the event is relatively contained due to a considerable degree of support by Central Banks.

Worst outcome – Greece and perhaps other countries leave EMU in a disorderly manner, causing a considerable amount of capital flight, brushing aside the best efforts of policymakers, the equivilant of the 2008 financial crisis.

What are the key dates?

  • EU Summit – 23rd May and then 28-29 June
  • Fiscal referendum in Ireland – 31st May
  • ECB monthly meeting – 6th June and 5th July
  • Parliamentary elections in France – 10 and 17 June
  • Elections in Greece 10 or 17 June
  • European finance minister meetings – 21 June
  • European Stability Mechanism

Will Greece leave the EU?

At this stage no-one can say for certain it’s 50-50. Some experts sees it as a 5-10% probability, others as high as 50-75%.



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