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Here are three possible endings to the eurozone crisis.

Ending #1: Greece defaults and exits the eurozone

Why it could happen?

The concept of a unified currency for a multi-state region is proving to be very problematic.

Because of the varied growth rates and the different needs of each member nation, it is very difficult to come up with a monetary policy that is able to accommodate everyone.

For example, while Germany needs a tighter monetary policy (e.g. higher interest rates), debt-ridden nations like Greece and Ireland want something more accommodative.

It is true that the costs of a breakup far outweigh the benefits for now, but it doesn’t mean that it isn’t a possibility.

Reforms and bailouts can only do so much, and if nations like Greece and Ireland are unable to resolve their debt issues, then we could see them forcibly kicked out.

What would be its effects?

A wide-reaching debt contagion!

Given the large exposure of other eurozone members to Greek debt, we could see a domino effect. Those exposed to Greek debt, namely Portugal, Ireland, Italy, and Spain, will be the next targets, and for them to survive, they will have to find ways to boost growth.

Unfortunately, their exposure will be far too big already, and they will be “too big to save”. Devaluation and inflation will hit them, and one by one, they will have to default and exit too.

Ending #2: Eurozone barely survives

Why it could happen?

Of course, there’s always a chance that the eurozone will emerge from all this alive but gasping for air. Think of it like surviving a zombie apocalypse with one eye and a missing arm!

European leaders have been doing all they can to sort out its financial mess, but we haven’t seen many permanent, long-term reforms yet.

They’ve been criticized for creating case-to-case band-aid solutions instead of enforcing concrete, preemptive changes. If they keep this up, they may be able to survive, alright. But don’t expect them to do it with flying colors.

What would be its effects?

If the European Union (EU) treats its fiscal woes as a mere liquidity problem, they may not be able to address other issues at hand, and European countries may never regain credibility and their competitiveness.

Doing this is basically like delaying the inevitable. The eurozone would once again face the possibility of breaking down when the European Financial Stability Fund (EFSF) expires in 2013. The current problems may be kept in check, but governance and national weaknesses will remain and can worsen down the line.

Depending on how the global economy performs, many eurozone countries may actually be able to recover and adjust appropriately.

But another possible outcome is a Greek debt-restructuring. Greece is expected to have the weakest GDP growth among the eurozone nations over the coming years. And without the safety net that the EFSF provides, uncertainty may easily return and Greece could be forced to restructure its debts.

Ending #3: Eurozone makes it and becomes stronger than ever

Saving the best for last, the third possibility for the eurozone is that it emerges from this crisis stronger! Awww, ain’t that just the happy ending that everyone wants?

Why it could happen?

Despite the not-so-graceful rescue missions that we’ve seen from the EU, we also have to acknowledge the fact that leaders have been stretching their limbs out to keep the union together. Heck, with the survival of their economies on the line, they should be!

Ironically enough, I think that by recognizing that an EZ-break-up is indeed possible, finance ministers have taken the first move into further integration. Now the next step for eurozone members is to move past their sovereignty issues and establish a more unified front.

What would be its effects?

For this to happen, some of the more well-off members have to entrust some of their power to the European Union. Eh, this is much easier said than done given that hotshot Germany hasn’t been the biggest eager beaver of the EU clique when it comes to bailouts.

But let’s say that everyone sets aside their differences and the eurozone becomes one big happy family. I think that the European Monetary Fund (EMF) can transform into the permanent fiscal-coordinating body that will oversee the balance sheet of the entire region.

Deeper integration will call for fiscal guidelines to be loose enough to allow easy liquidity but strict enough so as not to encourage nations to keep on borrowing. In doing so, the eurozone will become more credible than ever!