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Former IMF Official Warns of Euro Implosion

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EIRNS—Ashoka Mody was deputy director Europe of the IMF and was the case officer, among others, for the Irish debt crisis. In an interview with the Swiss financial daily Neue Zürcher Zeitung, he warns that the euro is unsustainable and the best way out would be for Germany to exit.

Mody forecasts an Italian debt crisis as consequence of the end of QE in six months. Whereas an Italexit with sovereign insolvency would threaten a global chain-reaction, a German exit would not be problematic, he argues The new deutschmark would revalue (i.e., be worth more) , but "the d-mark has constantly gained value between 1950 and 1999, and German firms have increased their productivity. They are used to revalue. And what they succeeded in doing in the past, they will do in the future as well."

An EIR source said that the end of QE, planned for the end of the year, won’t be problematic for Italy’s public debt, which has an average seven-year maturity, but it will affect the banks. A drop in bond values means a crisis for the banks which own those bonds, under current and future ECB rules. [CCC]