…economists at Dutch bank ING…have produced one of the first financial models of what might happen if the single currency falls apart during 2010. In a bleak assessment, entitled "quantifying the unthinkable", they warn that in the first year alone, so by the start of 2012, output would fall between 5% and 9% across various member states, while their new national currencies would fall by 50%.
Please don't fix those numbers in your mind, so here's the real point. The new national currencies, of the poorer countries, would fall by some amount. If that amount is small, that also provides reason to believe the current Eurozone can survive. If that amount is large, it provides reason to believe the current Eurozone cannot survive. (The poorer countries would now have to deflate a lot, and there would be a greater risk of a speculative attack on their banking systems.)
You might think that the collapse of the current Eurozone, and the devaluations, are good in the longer run (I do), but in the short run the entire process would be a nasty, volatility-laden, solvency-revaluing shock to the entire global economy.
You therefore should expect "either an OK outcome, or a very nasty shock," in exactly that conjunctive form. You shouldn't expect something in between. The conditions where the current Eurozone collapses are precisely the same conditions where the shock of transition is a big one.
And that includes a deflationary exchange rate shock to Germany as well.