Based on past performance, one wouldn’t want to put one’s mortgage on Mervyn King’s forecasts. One thing, though, that King is right about is that the crisis in the Eurozone makes forecasting extremely difficult.
The Euro crisis reaching its crescendo has been one of the most predicted events of recent times. To date, the Eurozone has done just enough to kick the can down the road each time. But there’s a growing sense in Whitehall that over the next few months things will have to be resolved one way or t’other. Indeed, one Tory minister predicted to me recently that an unravelling Eurozone will form the backdrop to this October’s Tory conference.
There are two main reasons to believe that the Eurozone crisis is finally going to come to a head. First, there’s the fact that the Greek government is expected to run out of money by the autumn without external help. Second, there’s an expectation that come September the pressure which Spain is under in the financial markets will become far worse.
If a country does fall out of the single currency, the initial effects will hit the British economy hard. But in the medium to long term, the break-up of the Euro is the least worst option. The alternative — this crisis simply dragging on and on — will prevent confidence returning to the global economy.Tags: Eurozone