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| Feb 06, 2010 8:39 pm |
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re: Is the Euro in Danger? |
Peter Heavey
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Hi Rob,
Another good subject to wonder!
The euro is under pressure - not just because of the PIGS (Portugal, Ireland, Greece, Spain) as they are commomly referred to.
Current theory in EU euro elite which includes Germany -whose economy has been run on Calvinistic principles and is dependent on export earnings - is to bully Greece to get into line even at the cost of blood on the streets.
This naive thinking is to send a message to the other three that bail-outs are not going to happen.
In all four countries excesses abounded - just like US and UK, however both have their own currency and can use fiscal measures to adjust them. As an example the £ has effectively been devalued by around 25% over the last year or so. Makes exports appear to be cheaper and imports more expensive.
The choices for the euro are:
Allow the markets to devalue it by 'selling' making it weaker.
Issue bonds to countries in difficulty - which Germany is against.
Keep it as is and run risk of say Spain saying - we want out and stuff the euro - we will not have blood on the streets over the issue.
Keep it as is and Germany may say - we want out - look elsewhere for your soft loans.
Finally agree on a general devaluation which would immediately be followed by a market further devaluation.
It looks to me that whatever decision is made it will certainly be more in Germany's favour than anywhere else.
On the other hand no decision means that German exports get cheaper to buy as the market devalues the currency - looks like a win-win for them.
Thanks for your time.
Best regards,
Peter
Private Reply to Peter Heavey (new win) |
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