Central Banks ‘Planning for Euro Area Break-Up’

Thursday, December 8, 2011
By Paul Martin


Before launching into the chart update, here are a few items that caught our attention. One was a Reuters report that European central banks that are members of the euro-system are quietly planning for a ‘shock’ that could lead to a break-up of the currency union.

As Reuters reports:

“Euro zone central bankers are looking at the possibility of a shock to the currency area that could trigger its partial break up and their priority in such a scenario would be to preserve the system’s survivors, central bank officials say.


In private, euro zone central bank officials say a lot of the pieces in Europe’s policy puzzle need to fall into place to calm financial markets and see off the crisis. An official at one of the bloc’s 17 national central banks identified a collapse in a peripheral euro zone country’s banking system as something that could trigger a break-up of the bloc in its existing form.

The ECB hosted a crisis communications exercise with officials from national euro zone central banks late last month that included a commercial bank collapse scenario. In the event of such a banking collapse leading to a country defaulting and – in a worst case scenario – leaving the euro zone, the central bank official said policymakers’ priority would be to protect the rest of the bloc.

The Rest…HERE

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