Monday, June 25, 2012

Implications of a Euro Breakup

A superb Bloomberg article by Simon Johnson on how the demise of the euro currency would affect big banks. Don't miss it. Johnson is a professor at MIT, and former chief economist of the IMF. It has long been reasonably obvious that if the euro breaks up, it will be messy to figure out how to settle contracts that were denominated in it. But this article points out that as you game the scenario through and imagine how it affects big banks, the situation is even stickier than it might have, at first, seemed.

Johnson may be trying to say that a euro breakup will likely be avoided, simply because a breakup would be so messy.