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Credit Suisse about the possibility of euro collapse
Analysts at Credit Suisse estimate the possibility of the euro area break up by only 10%. In their view, it would be much cheaper for the member nations to stay in the monetary union bailing out the indebted peripheral economies.
If euro collapses and the euro area disintegrates, the peripheral currencies would fall by around 50% pushing net foreign liabilities to 200%-250% of GDP for the periphery ex Italy, resulting in a 40% default on both sovereign and private loans. The economies will contract by about 9%.
The bank proposes to boost the EFSF for a TARP-like facility. According to them, the ECB has to keep purchasing peripheral bonds. In addition, Credit Suisse thinks that soft quantitative easing and weaker euro are also needed.