Douglas J. Elliott, partner at Oliver Wyman in New York, expert on financial regulation and public policy issues, writes about a potential risk for a new “Euro crisis”, which probability of occurrence will depend on the final balance between positive and negative factors of the current Eurozone’s situation.
His central scenario is a new version of the Euro crisis (sequel of the 2010-2015 euro crisis) over the next two years, where negative factors will weigh more than positives, but in which “Europe once again works through it without a breakup of the Eurozone or other extreme outcomes”. However recent positive developments in the region (European Commission’s proposal for a €750 billion Recovery Fund) lead him to lower this probability below 50 percent.
Negative factors (”Reasons for concern”):
Positive factors (“Reasons for hope”)
In any case, the final outcome of the Covid-19 crisis in the European Union will depend on the evolution of some crucial issues such as the uncertainty about the final economic recession, the weakness of the Eurozone due to lack of fiscal integration and banking union and the potential impact of the German Constitutional Court’s rulings on ECB’s powers.