EVEN as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.
There are signs that the euro zone’s economy is heading for recession, if it is not there already. Industrial orders in the euro zone fell by 6.4% in September, the steepest decline since the dark days of December 2008. A closely watched index of euro-zone sentiment, based on surveys of purchasing managers in manufacturing and services, is also signaling contraction, with a reading of 47.2: anything below 50 suggests activity is shrinking. The European Commission’s index of consumer confidence fell in November for the fifth month in a row.
Many are warning that if political leaders don't change course, a breakup of the Eurozone would plunge the United States and the rest of the world into a slowdown and possibly another recession.
"If Europe turns out badly, it's much more likely we'll go into recession," said Michael Spence, a Nobel Prize-winning economist at the New York University Stern School of Business. "If you take a big chunk like Europe and turn it down, it would probably bring everybody else down, including us." Read more....