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IPFS News Link • Economy - International

Why A Eurozone Break-Up Would Trigger The Mother Of All Financial Crises

05-04-2010 • Businessinsider.com/

A system-wide bank run would follow. Investors anticipating that their claims on the Italian government would be redenominated into lira would shift into claims on other euro-area governments, leading to a bond-market crisis. If the precipitating factor was parliamentary debate over abandoning the lira, it would be unlikely that the ECB would provide extensive lender-of-last-resort support. And if the government was already in a weak fiscal position, it would not be able to borrow to bail out the banks and buy back its debt. This would be the mother of all financial crises.'

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Reported By Jack Gregson

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