Collapse of the Eurozone in simple terms please

[Little Dave]

With all of the uncertainty surrounding Greece, Italy and Spain at the moment what would be the consequence on the UK economy if the Eurozone collapsed?

[ringram]

Major export partner, so it wont be positive.
On the upside the pound is independently managed so we should be better placed on that basis.
It gained 0.5% against the euro today, so look to cheaper holidays, but less economic growth in the UK as a result in the short term.
Longer term is mainly positive, but nowhere near the irrational exuberance of yesteryear.

Thats my guess.

[P-Jay]

We'd certainly lose on exports to the EU, and to the wider world as a massively defaulted Euro would make exports from Euro countries much cheaper.

However Manufacturing is a sadly a small part of our economy now.

More of a risk the is £80bn or so of EU Bonds we hold. Whether that could sink us further I don't know.

[Beardy10]

Biggest immediate risk to the UK is to our banks directly through their exposure and indirectly through the pressure it puts on the banking system. Pretty much every European bank has too much exposure to too many risky assets and have been trying to reduce this exposure over the last three years....because of the ucurrent ncertainities banks are finding it much harder to either borrow money at all (wihout resorting to central banks) or to borrow at competitive rates. All banks are trying to deleverage (take less risk) and whilst this happens in a relatively orderly fashion it is manageable as their are other investors (insurance companies, asset managers, pesion funds etc) that will buy those assets.

The nightmare scenario comes about if a major European bank is forced into a a fire sale of assets which depresses market prices and thus forces other banks into taking losses and doing the same. Some of out banks (RBS and LLoyds) in particualr still have extremely fragile balance sheets....with only a relatively small amount of equity outstanding (HM Govt already owns 85%) it is certainly a remote possibility that RBS could yet be nationalised. That's the worst outcome for the UK.