Scotland business

Scottish jobs warning over eurozone crisis

Euro coins (generic image)
Image caption The report said a Greek exit from the eurozone could lead to a loss of just under 50,000 jobs.

A collapse of the eurozone could cost the Scottish economy tens of thousands of jobs, according to a new report.

Strathclyde University's Fraser of Allander Institute said a Greek exit from the currency alliance could result in nearly 50,000 fewer Scottish jobs after three years.

It also said job losses could reach 144,000 if all 17 eurozone members reverted to their own currencies.

The institute said this was a "what-if" scenario and not a forecast.

Report author Prof Brian Ashcroft said a eurozone collapse would lead to a "dramatic and frightening shock to the Scottish economy".

The institute's report said growth in the Scottish economy appeared to be weakening again after some survey evidence of a pick-up in the first quarter of the year.

The report argued it had become clear that a recovery in output stalled after mid-2010, citing the UK government's fiscal austerity programme as "the main culprit".

The institute went on to say that the situation in the eurozone "complicated the forecasting picture considerably".

Election victory

At the weekend, world leaders welcomed the narrow election victory of Greece's broadly pro-bailout New Democracy party and urged Athens to form a cabinet quickly.

They are hoping that reforms will help Greece overcome tough economic and social challenges.

However, the Fraser of Allander Institute argued that the risk remained of a Greek default and even exit from the euro in the near term, and the break-up of the euro in the medium term.

It said it had considered the two outcomes as possible scenarios to assess their likely impact on the Scottish economy.

"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 50,000 jobs," it said.

"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."

'Great Recession'

The report added: "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 and worse than our simulation estimate of the effect of fiscal consolidation."

The Scottish government said that while the break-up of the eurozone represented the worst-case scenario in the Fraser of Allander forecast, it continued "to actively monitor the situation".

A spokesman added: "The ongoing uncertainty has undoubtedly added to the pressure on the world economy, and that is why this government and our enterprise agencies are doing everything, within our current powers, to support recovery - with key successes in terms of falling unemployment and the best record of inward investment jobs anywhere in the UK."

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