The euro is “practically dead” and Europe faces a financial earthquake from a Greek default, according to Attila Szalay-Berzeviczy, global head of securities services at Italy’s biggest lender UniCredit SpA.
“The euro is beyond rescue,” Szalay-Berzeviczy said in an opinion piece for index.hu., a Hungarian news portal, which he signed as former chairman of the Budapest Stock Exchange. “The only remaining question is how many days the hopeless rearguard action of European governments and the European Central Bank can keep up Greece’s spirits.”
The article described a “worst-case scenario,” he said in a telephone interview from Budapest today. Szalay-Berzeviczy’s “are his own personal view and do not reflect the position of the company,” Claudia Bresgen, a spokeswoman at UniCredit in Munich, Germany, said by e-mail.
A Greek default will trigger an immediate “magnitude 10” earthquake across Europe, he predicted. Holders of Greek government bonds will have to write off their entire investment, the southern European nation will stop paying salaries and pensions and automated teller machines in the country will empty “within minutes,” Szalay-Berzeviczy wrote.
The impact of a Greek default will “rapidly” spread across the continent, possibly prompting a run on the “weaker” banks of “weaker” countries, Szalay-Berzeviczy said in the article. “The panic escalating this way may sweep across Europe in a self-fulfilling fashion, leading to the breakup of the euro area.”
‘One Scenario Among Many’
“It’s one scenario among many, one which may lead to the breakup of the euro area via a banking crisis,” he said in the interview. “This can still be averted. It primarily depends on the Germans, and secondly on European citizens, especially on how much the Greek population can tolerate.”
The euro strengthened versus most of its 16 major counterparts, advancing to a one-week high against the dollar, as European leaders signaled they will do what is necessary to aid debt-strapped regional nations. The European Union proposed a financial-transactions tax to take effect in 2014 and Finland’s parliament approved an expansion to the region’s rescue fund.
The 17-nation currency appreciated as much as 0.8 percent to $1.3690, the strongest intraday level since Sept. 21, before trading at $1.3613 as of 9:20 a.m. in New York.