THE UK would face huge costs if the Eurozone disintegrated, economists from ING Bank warn today, as trade would be devastated and financial links with the continent would suffer badly.
Britain would face a major recession, losing five per cent of GDP in 2012 – around £75bn.
Eurozone economies themselves would face losing 12 per cent of output over the first two years after break-up, the analysts believe, with GDP across the currency union falling by nine per cent in the first year alone.
Extending the analysis forward, the costs would still not be recouped by 2016, as the short term impact continued to have longer repercussions.
Global growth would be knocked, and the impact of a stronger dollar would send the US into “at least a mild recession in 2012”.
Japan would see its economy shrink thanks to its trade links, and China would suffer slower growth rates.
Peripheral Eurozone economies could see inflation rocket to double digits as their individual currencies plummet in value against core countries’ currencies and those of the rest of the world.
“The costs of keeping the euro intact have risen, but our results continue to beg the question of why policy-makers would even dream of an exit being a viable policy option,” said Mark Cliffe from ING.
Fathom Consulting believes the UK would lose seven per cent of GDP if the Eurozone collapsed.