If there is a phrase being bandied about increasingly in the eurozone these days, it is this one: The breakdown of Europe's 17-nation single currency is possible -- but not yet probable.
Why is the breakdown possible? Because it's getting increasingly costly for the governments of weaker euro-member countries, like Italy and Greece, to borrow the money they need to pay their operating costs and their debts.
And why is the breakdown not yet probable? Because even as these governments' borrowing costs rise to rates generally seen as unsustainable, the EU and international financial organizations say they remain committed to keeping the eurozone together.
But no one is certain whether the richer countries -- which so far have bailed out only the relatively small economies of Portugal, Ireland, and Greece -- could afford to bail out a much bigger economy like Italy's. And that makes the question of whether the eurozone could break apart very real.
Core vs. Periphery
Many experts believe that if the eurozone were to break apart it would be because richer members leave it rather than continue to try to bail out poorer ones.
In fact, there are already some signs that the richer countries -- the so-called "core" or northern countries of the zone -- are already considering that option.
"They've discussed having a treaty amongst a smaller number of countries that would have a lot more fiscal coordination and a centralized treasury even, perhaps a eurobond at the end of it all, and I think that's the direction in which they are going to move," says Peter Boone, a senior visiting fellow at the London School of Economics.
"It will probably include Germany, France, the Netherlands, perhaps Finland and a few others, but it would be those countries -- it would not include the 'periphery,'" he adds, referring to the currency's weaker members, mostly in the south.
But if the eurozone breaks up, none of its member states can hope to escape the massive economic turmoil that would result. Nor could any country elsewhere in the world that is linked to the eurozone by banking or trade ties.
From Bad To Worse
The countries that would suffer first and foremost would be the eurozone's weak countries -- the same ones whose governments' over-borrowing has sparked the now two-year-old euro crisis.
The well-known commercial bank UBS recently estimated that the costs of leaving the eurozone for a weak country would be equivalent to 9,500 to 11,500 euros ($12,800-$15,500) per person in the first year. That equates to a range of 40 to 50 percent of the country's gross domestic product (GDP).
Those high costs would come as the country leaving the eurozone switched back to a national currency and printed money to pay its debts and public-sector wages. The new currency would be devalued in its purchasing power compared to the former euro because people would have little confidence in it and price inflation would almost certainly follow.
Panos Tsakloglou, a political economist at Athens University of Economics and Business, says that initially the living standards of a country like Greece would decline dramatically.
The only ray of hope would be that the devalued currency would make Greece's products cheaper for other countries to buy, boosting trade and eventually leading a recovery.
"If we judge from the position of other countries that left monetary unions, what we is that initially in a period of two or three years the economic situation deteriorates dramatically," Tsakloglou says, citing the case of Argentina after it left its currency peg with the U.S. dollar in 2002.
"After that, and we are talking about a very strong decline in the living standard, after that there is a far speedier recovery than in the first scenario" of Greece staying in the eurozone and applying austerity measures, he notes. "However, it starts from a substantially lower base."
Tsakloglou personally hopes to see Greece emerge from its crisis by staying in the eurozone -- a sentiment most of his countrymen strongly share.
'New Euro' Birthing Pains
The eurozone's northern countries, too, could expect a period of difficult readjustment if the euro collapses, even if some of them band together to create a new currency of their own. That new currency, given the fate of the original euro, would almost certainly have a new name -- one that no one has proposed yet.
A breakup of the eurozone would leave the core northern countries with a heavy debt load as they had to find ways to bail out their banks devastated by the defaults on previous loans to the weaker euro countries.
UBS estimates that for a country such as Germany to leave the euro, the cost would be equivalent to 6,000 to 8,000 euros ($8,000-$10,800) per person in the first year, an amount equivalent to 20 to 25 percent of the country's GDP.
Equally difficult could be the almost certain appreciation of the "new euro" as it was set free of the drag of weaker economies. That would mean exports from the core states would become more expensive than those form competing states like the United States and Japan, something that could slow the core countries' growth.
Back To The Credit Crunch
Across Europe and the much larger financial world, the shock waves of any breakup of the eurozone would be almost certain to bring a new global recession.
Banks, brokers, and exchanges are already in the front line of the euro crisis and would take huge losses as governments that owe them money default or make payments with devalued currencies. Even banks that never loaned directly to those governments would be vulnerable, as the cost for buying insurance for loans would soar generally.
All banks would have less money to lend, likely creating another worldwide credit crunch and slowing economies everywhere.
"It would certainly hurt the United States because U.S. banks are fairly heavily exposed to Germany and France and the core banks. They are not exposed to the periphery," says Boone of the London School of Economics.
"But there would be lot of concern about whether or not they would be able to make it through, so there would be another big shift towards less risky assets around the world, you would have trouble in stock markets and in some of the emerging market bonds and so I would expect we would end up with another [global] recession and it would take one or two years to get out of that."
The End Of 'Europe'?
It's a scenario that gives no joy to anyone. And it also is one that could change the face of Europe forever.
Since the end of World War II, Europeans have become used to the idea of an increasingly united Europe -- one where countries that so frequently warred in the past are bound by economic ties that make new conflicts between them virtually unthinkable.
But how much that ideal could survive the crash of the euro is open to question. Many experts worry that a collapse of the eurozone could also bring the collapse of the European Union itself.
Tsakloglou fears that protectionist feelings would grow to such heights with the collapse of the euro that it's hard to imagine any of the revenue sharing that currently underpins the EU could continue.
"We can have some sort of collapse of the eurozone and continuation of the European Union. However, I have the feeling that the political pressures will be enormous," says the Greek economist.
"Let's say that some big countries, much bigger than Greece, are collapsing, and as a result of it we have the collapse of the banking system in some countries in the core and you are a voter in a country like this," he says. "Would you be willing to provide [new] money to these [collapsed] countries through a new Marshall Plan or through structural funds or through the Common Agricultural Policy and so on? I have a feeling that there will be a huge political backlash asking for cutting any ties with these countries."
No wonder, then, that the EU today remains committed to getting the eurozone through its crisis intact. No wonder, too, that as the amounts of money needed keep growing, so do worries of what might happen if the efforts fail.