144,000 Scots jobs could be lost if euro collapses, think tank warns

More than 140,000 jobs in Scotland could be lost if the eurozone collapses, an economic think-tank has warned.

The Fraser of Allander Institute estimated such a scenario could have a worse impact on employment than the "Great Recession" of 2008 and 2009.

It also cautioned if Greece were to leave the euro that alone could result in the loss of almost 50,000 Scottish jobs.

The think-tank - part of Strathclyde University - examined the growing economic problems in the eurozone as part of its latest study.

It found even though only about 0.3% of Scottish exports go to Greece, any further deterioration of the situation there could have major ramifications here.

Great Recession

Professor Brian Ashcroft, professor of economics at the university, said: "Our analysis suggests that a Greek exit from the eurozone would provide a sizeable shock to the Scottish economy.

"But the break-up of the euro would lead to a loss of output and jobs in Scotland comparable to the impact of the Great Recession of 2008 to 2009."

The report said the situation in the eurozone had deteriorated again recently, with concerns about whether Greece would remain in the euro.

It added if other countries were also forced to leave the currency, the consequence could be the break-up of the eurozone.

The think-tank estimated a Greek exit from the euro would lead to a fall in GDP in Scotland of 1.2% and the loss of 49,000 jobs.

But the break-up of the eurozone would have a far greater impact, it warned, saying this could lead to a 5.3% fall in GDP and 144,200 job losses - more than the 122,000 jobs lost in the recession.

The report said this was "not a forecast but a 'what-if' impact study" looking at the impact of these scenarios over three years.

It also said it had not taken into account any action the Bank of England or the UK Government may take to try to mitigate the impact of these.

'Major economic event'

In its latest economic commentary, the Institute stated: "Our main conclusions are: First, a Greek exit leads to a drop in GDP in Scotland of -1.2% and a loss of just under fifty thousand jobs. Secondly, the consequences of the break-up of the euro would be a major economic event for Scotland even though we are not in the euro.

"With an estimated drop in GDP of -5.3% and loss of -144,200 jobs the effect would be comparable in scale to the effects of the recent Great Recession."

It added that such an event, coming in the wake of the recession and the austerity measures brought in by the Government, was "something that we must hope can be avoided" adding: "If it does occur, the damage to the Scottish economy will be felt for many years to come."

The economic commentary is sponsored by professional services firm PwC, with Morven Campbell, a risk assurance partner there stating: "Scottish businesses must understand and prepare for all of the potential eurozone scenarios."

The Institute said recovery from the 2008-09 recession "remains weak".

The think-tank also commented: "Growth in the Scottish economy appears to be weakening again after some survey evidence of a pick-up in the first quarter of the year."

'Low growth'

While it stated the Scottish and UK economies were beginning to recover from recession by the middle of 2010, it argued this later "faltered", saying the coalition Government's austerity programme was the "main culprit" for this. It is now forecasting that the Scottish economy will grow by 0.4% this year, with GDP growth of 1.5% in 2013 and then 2.5% in 2014 - slightly less than it forecast in February.

The think-tank also estimated that the jobless total - which has now fallen for the third month in a row to 220,000 - would increase to 246,100 by the end of this year. It then expects unemployment to rise to 252,400 by the end of 2013, before falling to 238,200 by the end of the following year, when it forecasts growth and job creation will pick up.

Professor Ashcroft said: "The positive signs from surveys earlier in the year that the Scottish recovery was picking up have been undermined by the latest survey evidence. We appear to be condemned to a continuing period of low growth as fiscal austerity continues and the clouds over the eurozone darken."

A Scottish Government spokeswoman said: "While the break-up of the eurozone represents the worst-case scenario in the Fraser of Allander forecast, we continue to actively monitor the situation."

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