Collapse Would Be Catastrophic
OCBC former Chair Emeritus, Wayne Wedin, organized a private briefing with European Parliament Member Ville Itälä who sits on the European Union Transportation and Tourism committees. Mr. Itälä met with business and academic leaders at Cal State Fullerton Mihaylo School of Business on Friday, November 4 and discussed the current European Union financial crisis. OCBC’s Co-Chair of Economic Development, Chris Harrington, Senior Vice President of Strategy and Business Development for Toshiba America Information Systems attended the meeting.
Mr. Itälä indicated Greece is of critical importance not just because of the massive debt involved, but due to the high probability its default could trigger a domino effect. In fact, it would likely be a true domino falling: Greece, Italy, Spain, Portugal, and Ireland – in that order. Italy’s collapse would be catastrophic, and the full consequence of all the dominos falling would be a traumatic blow to the world economy. There is a perfect storm hitting Europe with four potential simultaneous crises: Debt Crisis – huge debt, multiple high-risk countries with debt greater than GDP; Financial Crisis – banking system not performing well under stress tests; Political Crisis – revolts against austerity; slow action due to multiple democratic processes; Economic – lack of innovation, lower consumption, aging population.
Five countermeasures are recommended for Greece: Bailout; Parachute; Stabilization (1 Trillion Euros to be used for all the dominos); Center Bank Action and Austerity. But even these five actions may not be sufficient. Banks will need to write-off 50% of Greek debt and raise 106 B Euros of new capital by June 2012 as part of the countermeasure plan. It is not obvious that EU has 1 Trillion Euros for the Stabilization Fund. For more information Celeste Signorino, Vice President of Investor Relations and Business Development.