The fate of the euro is in your hands | FT Alphaville

The fate of the euro is in your hands

Want to forecast the future of the eurozone? There’s an App for that.

(Not really — but close.)

Independent Strategy (who, incidentally, have it in for Belgium, but are pretty knowledgeable on sovereign crises) have built a spidergram of events and probabilities that could lead to the euro’s demise.

It looks like this — click to enlarge:

The nifty part is that you can download the Excel file of the spidergram chart and insert your own probabilities to get your own risk of € demise result. It’s like Choose Your Own Adventure, but with Germany and Greece instead of the Knights of the Round Table, or the Abominable Snowman.

As Independent Strategy explain, the basic thesis is that the fate of the euro now hinges on the actions of Germany, and whether or not it decides to stay or leave the common currency. Their outline:

The spidergram covers the following alternative outcomes. The first path is that Germany gets what it wants — a Maastricht Treaty, or a version of it that has real teeth to keep euro members in line. In this case, the euro survives.

The second path is Germany does not get this (or all of this). Then two things could happen. The first is that the weaker Eurozone states revert to their old ways. Then the Germans quit the euro and it collapses. The second is that the weaker Eurozone members are so shell-shocked by what has happened in the current sovereign debt crisis that they behave themselves fiscally in the future and undertaken most necessary reforms. In this case, the euro would survive too because the Germans would stay.

As for Independent Strategy’s own probabilities — which you can see above — they reckon they result in a 20 per cent chance the euro won’t survive in its current state.

A fuller explanation, plus the Excel file (and a mystery bonus) in the Long Room.

Related links:
‘A financial earthquake’ – FT Alphaville
The interactive eurozone crisis – FT Alphaville
The fate of the euro – The Big Picture
Germany’s eurozone crisis nightmare – Martin Wolf, FT