Charles Dumas, chief economist of esteemed Lombard Street Research in London, says the euro zone will definitely collapse.
“The longer it lasts, the more painful the ultimate exit will be,” Dumas, former head of research for Morgan Stanley in London, told Bloomberg.
“These economies simply don’t belong together.”
Greece and Spain in particular are pulling down the 16-nation monetary union, he says.
“The Greeks and Spanish have grown very fast on the back of artificially low interest rates given to them essentially by being in a union with Germany, France and Benelux (Belgium, the Netherlands and Luxemburg).”
So Greece and Spain have grown too fast, pushing the Greek budget deficit to 12.7 percent of GDP and Spanish unemployment to 19 percent, he says. “It’s a disaster.”
It made no sense to link weak Greece, Spain and to some extent Portugal and Italy to strong Germany, France and Benelux, Dumas says.
“The whole thing is a blunder. Greece, Spain and Ireland were fattened up for 10 years by low interest rates and ultra fast growth. Now they’re oven ready like Hansel and Gretel. But unlike Hansel and Gretel, there’s no magic exit.”
Dumas isn’t the only one concerned about the euro.
German Chancellor Angela Merkel said in a recent speech, “The Greek example can put us under great, great pressures. . . . So the euro is in a very difficult phase over the coming years.”
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