Business leaders fear for eurozone survival

World business leaders see a growing risk that the eurozone could break up in the next three years, according to research by the Economist Intelligence Unit commissioned by RBC Capital Markets, published on Monday.

Half of the 440 chief executives and heads of banks questioned say there is a greater than 50 per cent chance of one or more countries leaving the eurozone by 2013 because of the deepening problems of debt in the 16-nation bloc. More than a third (36 per cent) see at least a 25 per cent chance of a complete breakup over the same period.

Out of those who see a significant chance of the eurozone losing a member in the next three years, Greece is considered the country most likely to leave the eurozone, followed by Portugal, Spain and Ireland.

Germany is perceived as the fifth most likely country to pull out, possibly reflecting the respondents’ concern that the government in Berlin may lose confidence in monetary union if the crisis continues.

While the prospects of a G20 economy defaulting on its debt remain relatively low, almost one-third of the respondents place the odds of this occurring at 50 per cent or more, indicating a rising concern that the debt problems facing the global economy may spill outside the eurozone.

Among those that foresee a significant chance of a G20 default, Italy received the most votes, followed by Argentina, Turkey, Mexico and Russia. The United Kingdom is perceived to be the western European country, after Italy, most likely to default on its debt, both within the G8 and the G20.

Separately, two-thirds of executives (67 per cent) believe the value of the euro will continue to slide over the next 12 months. Concerns about the euro’s weakness have reinforced the position of the dollar as the reserve currency of the near future, although its power is perceived to be in decline.

Eighty per cent of the respondents believe the dollar will remain the dominant reserve currency in three years’ time, with the consensus dropping to 57 per cent over a five-year period. This picture likely says more about the lack of real alternatives, rather than confidence in the dollar, and is further illustrated by the fact that more respondents (15 per cent) see the Chinese renminbi as the reserve currency of choice within five years rather than the euro (12 per cent), in spite of the low likelihood of this occurring.