What is the worst that can or will happen to Europe in this crisis?

[Tuck!]

I'd like to see some of our economic experts discuss this. Truth be told, I'm increasingly nervous about the future of the global economy.

[Cubby]

Is there any chance that the euro could be discontinued and the countries go back to their original currency (franc, mark, lira, etc.) ?

What would be the consequences of this?

On a tiny side note, do European computers have a symbol for "euro" on their keyboards?

Dow Futures for Monday morning were down 101 points a little while ago, they are now down 69 points. I've rarely seen them more than 50 points in either direction. At the moment, things are looking bad for Wall Street today. Asian/Australian markets have already been down sharply due to the continuing Euro crisis.

[2952-0-0]

We're really in unchartered waters here.

Any half serious discussion of a given country leaving the Eurozone will be a disaster:
1) There would be massive bank runs which cause a disastrous fall in the money supply, and kill the economy altogether. And to say nothing about the sheer logistics of it all.
2) Potentially, that given country could suddenly impose capital controls restricting outflows of euros and forcibly convert bank deposits, loans, contracts, etc to the new, devaluing currency. But those capital controls must be imposed by all so-called PIGS simultaneously, otherwise there would be massive bank runs in the other PIGS.
3) Such a crisis will cause chaos on the non-Eurozone edge of Europe; those countries whose currencies are linked with the euro will resemble Asia during the 1997 crisis; those countries with free-floating currencies could crash like Iceland, when the EU is least able to help.
4) This may be a mortal blow to the entire EU project. It will split the continent right across the middle and turn the EU into a massive version of Belgium.

The ECB could continue its extraordinary policy of accepting junk bonds as collateral, which risks raising inflation to a level which makes Germans/Dutch/Austrians/etc grumble.

In the worst case this would cause Germany, Austria, Benelux, France, and some similar countries to form their own common currency named the frank, whose Central Bank HQ is in Frankfort; the ECB moves its HQ to Milan. The "rump" Eurozone to devalue without hurting the Frankzone. In this case Ireland could potentially stay in the "old" Euro until it devalues to a rate when it reintroduces its old currency which is linked to the Pound. But this is also a logistical nightmare and the risk of massive capital flight still exists, and it's doubtful the "rump" Eurozone will last for more than a few years.

If I had to guess what will happen, I'll say the massive monetary expansion continues for a long time, which somewhat alleviates the pain for the south, while the north grumbles about the higher inflation but is not angry enough to do much about it.

At this point it's a lot about what politicians think.

[Democratic Hawk]

I don't know but Germany seems intent on imposing deflation across Europe. Does Angela Merkel really want to go down in history as the Herbert Hoover of our times?

[Queen Mum Inks.LWC]

Is there any chance that the euro could be discontinued and the countries go back to their original currency (franc, mark, lira, etc.) ?

That'd be pretty hard to do, I'd imagine.  They'd be going to a brand new currency, whereas when they switched to the Euro, it was an already established currency.  The only countries who might be able to pull it off would be Austria, Germany, Ireland, and Spain, since they still semi-accept their old currencies (I believe - correct me if I'm wrong on that).

[opebo]

The ECB could continue its extraordinary policy of accepting junk bonds as collateral, which risks raising inflation to a level which makes Germans/Dutch/Austrians/etc grumble.

If I had to guess what will happen, I'll say the massive monetary expansion continues for a long time, which somewhat alleviates the pain for the south, while the north grumbles about the higher inflation but is not angry enough to do much about it.

Your post was interesting and I agree with a good deal of it, but I don't think there's any potential for inflation in the sense of anything like 5%+ per year.  Unless by 'inflation' you just mean not the deflation that is being built in now.