EU: The teetering alliance

The eurozone appears to have secured a perpetual spot on the global media these days. After the fiasco over prospects of Greece, Italy has joined the bandwagon of the so-called sick eurozone members. The ailment afflicting Rome is the same as that faced by many weak states of the bloc-an unprecedented debt crisis. The third largest economy of the eurozone and eighth largest of the world has been riddled with speculation over the sustainability of its debt. With a whopping debt to GDP ratio of about 119 percent, Italy stands second in the eurozone debt league after Greece. Concerns about eurozone economies promulgated a sharp upsurge in borrowing costs for Italy, with Italian bond yields rising to seven percent-"the point at which the smaller eurozone economies of Ireland, Portugal and Greece had to be rescued," quoted the Telegraph. And this could not be reverted despite the resignation of the scandal-ridden Italian premier. Italys individual woes aside, the contagion on the entire bloc is what will leave European and global leaders turning in their sleep, thanks to talks abounding that the eurozone may split. Reuters quoted sources privy to the EU mentioning a possible overhaul of the eurozone, involving a smaller but more integrated bloc. The taboo topic of a eurozone split has opened a plethora of questions and concerns about various policy alternatives. The foremost point of contention would be the means of engineering such a move. The complexities of the Maastricht Treaty-the laws which govern the EU-of the eurozone and the consequences of some countries exiting the bloc mean that the process will have to be very long and quite canny. Whether some countries voluntarily depart from the inner circle of the EU, or are forced out by other members, the most pressing concern for all eurozone states would be of a rather grave debt predicament in case some members are seen out the door. Those leaving the eurozone will be left struggling with currency devaluation and bank-runs as people would scramble to take out any euro-denominated savings before currency overhauls. Further, citizens of the detached nations will tend to hold back their spending in order to gauge how the scenario turns out post-split, also indicating a plausible slowdown of the economy. For eurozone countries which get to retain the prestigious membership, losses on lending to governments and banks in the severed countries will be a cause for concern. Regardless, whether a split takes place or not, the consequences are likely to be messy. EU leaders need to take steps very carefully to pave a path towards recovery with possibly stricter regulations in case the treaty is revisited.