[size=150:203v0k1i]Here’s how the euro could collapse –
by Max Julius

As officials hammer out a rescue package for Ireland, the single currency’s chances of survival have been thrown into doubt once again.

Doubts and denials
Politicians and economists began seriously to question the future of the euro in the wake of the EU-IMF bailout of Greece. As officials hammer out a similar aid package for Ireland, the single currency’s chances of survival have been thrown into doubt once again.

William Hague, the foreign secretary, has suggested the euro could collapse, saying he hoped it would survive, but adding ‘who knows?’

Fears that Portugal and even Spain may seek a rescue deal have heightened the speculation, causing the head of the European Union's bailout fund to insist there is ‘zero danger’ of the currency union breaking up.

‘No country will voluntarily give up the euro – for weaker countries that would be economic suicide, likewise for the stronger countries,' Klaus Regling was reported as saying.

Indeed, economists agree that although the euro’s prospects are more uncertain today than before the sovereign debt crisis erupted, it is unlikely to disappear. Nonetheless, as the possibility continues to be raised among the news media, we look at how a euro collapse could actually play out.

A north euro and a south euro
One of the most commonly mentioned scenarios is one in which Germany, the eurozone’s largest economy, leaves the monetary union.

Talk of such a move has grown in light of domestic anger in Germany at the possibility their bailout contribution will be used to fund early retirement for Greeks, or Ireland’s super-low corporate tax.

Professor Iain Begg, research fellow at the London School of Economics, noted that of the scenarios in which the eurozone breaks up, one where Germany defects and takes with it Austria and possibly Benelux – Belgium, the Netherlands and Luxemberg – was ‘slightly more probable.’

He also cited talk of a division of the eurozone into a ‘north euro’ and a ‘south euro.’ However, the professor said he was sceptical of a ‘deterministic view’ that sees the periphery and south as one category, and the north as another.

Dr Sean Holly, director of research at the University of Cambridge’s Economics Faculty, noted that since Germany is much more competitive than other parts of Europe, a reinstated deutschemark could appreciate against the euro, helping those countries that remain in the eurozon

It was never a feasible option to have a single currency without economic and fiscal control from the center. But to disclose that at the beginning would have caused an outcry from the sovereign nations. Now the view seems to be that nothing can be done other than hand over control because the project is too advanced. Whether or not the progress of the Euro project, to this stage, was anticipated by those constructing the project is something we will never know. But what we do know is that, like most things to do with the EU, almost none of the electorate of the Euro member states were able to vote on the matter. So it will fail - eventually.

I believe you are right blink, I can't see any future for the Euro, probably 1 or 2 years is all that is left for it. There will be a sigh of relief from all people living in the countries that will give up the Euro. Beaurocrats in Brussels will be beside themselves with fear of losing their overpaid jobs and having to go back to actually working for a living. Has anyone any ideas on BG if this happens, are they still destined to join the Euro whatever the circumstances or can they tell Brussels they will not be joining the monetary union, very wise if they do in my opinion. ::

While I agree with what been said here, the most likely outcome is a very gradual evolving of a new workable system. A process that will take probably the best part of 5 to 10 yrs. a process that will involve a lot of bumps in the road along the way, loss of jobs, social unrest etc. Come back in 5 yrs time and I think you will find more prosperous countries but contained within a German straitjacket. For those who are on the inside, life wil seam very good and it is they who will maintain the 'new look' Europe.

Has anyone any ideas on BG if this happens,

Good question itchyfeet

I don't know a lot about it but if things continue the way they are then I can see the Euro going, as to what difference/effect this would make to Bulgaria then it would be exactly the same as any other country using the Euro why should Bulgaria be any different ?

sarah

Sarah wrote:

I don't know a lot about it but if things continue the way they are then I can see the Euro going, as to what difference/effect this would make to Bulgaria then it would be exactly the same as any other country using the Euro why should Bulgaria be any different ?

sarah

sarah
Would it be exactly the same as any other Country, because as far as I am aware no other Country has their present currency pegged against the Euro, and if the Euro went where does that leave the state of the Leva

I think there's a real danger that one or more countries in the Eurozone could face real problems in the coming year. Whether that leads to one or more of them defaulting on national debt remains to be seen. It just goes to show that the 'one size fits all' approach doesn't work for everyone. A European Central Bank setting interest rates for an economically strong Germany and an economically weak Greece just doesn't add up to me.

More prices by Deborah Hyde on Nov 29, 2010

European stock markets moved lower again in morning deals as the €85 billion aid package for Ireland failed to calm jitters.

France's CAC was 0.28% lower, while Germany's Dax was down 0.16%. Spain's IBEX was off 0.6%, having dropped 13% since the middle of October when France and Germany's leaders first agreed that in the future investors will have to accept lower returns on money they lend to governments that later go bust.

[size=150:1i12n459]The euro was one cent lower against the dollar at $1.32 and [size=150:1i12n459]0.43% lower against the pound at 84.8p.
For investors the most important news was that bond investors would not have to accept lower repayments now on the money they have loaned to Ireland and its banks.

News that the European Council has agreed to set up a new permanent mechanism to deal with governments that get into financial trouble in the future also offered some reassurance. But it failed to halt fears that other European countries will need to be bailed out

I Love this bit "
News that the European Council has agreed to set up a new permanent mechanism to deal with governments that get into financial trouble in the future also offered some reassurance. But it failed to halt fears that other European countries will need to be bailed out"
just really sums it all up we will all be in the s**t soon

If it were down to me I would have not allowed this currency in the first place I do think what is happening now was really a fore gone conclusion but as always them that know best decided to bury their head in the sand and now look whats happening lets be honest it was doomed from day one.

You might be right Scott, we could all be in the s**t

[size=150:30a7dzxl]Euro tumbles as Italy added to list of eurozone targets
by Gavin Lumsden on Nov 30, 2010 at 13:41

The euro falls to its lowest level in more than 10 weeks as investors baulk at the risk of holding the bonds of a growing number of eurozone countries, including Italy.

The euro has fallen to its lowest level in more than 10 weeks against leading currencies as debate rages over whether the eurozone can survive, with Gartmore's Chris Burvill and Ignis' Barry Norris the latest to voice their opinions.

The euro slid nearly 1% against the dollar to just over $1.30 level while against the yen it tumbled 1.3% to 109 yen and versus the pound it slipped 0.6% to 83p as investors looked askance at the European Union-led bailout of Ireland at the weekend.

The risk premiums on Spanish, Italian and Portuguese bonds shot to 11-year highs as the €85 billion rescue of Ireland’s banking and economic systems is seen as having failed to convince the market that this is the end of Europe’s economic crisis.

Portugal, viewed as the next target for speculators, remained in focus as the Bank of Portugal warned that the country’s banks may face an ‘intolerable risk’ if the painful austerity measures announced by the socialist government are not implemented.

Italy, now being added to the list of possible vulnerable ‘periphery’ eurozone countries, was being described as ‘too big to fail’ and ‘too big to bail’, by analysts.

Amid the turmoil the pound dipped 0.3% to $1.55 against the dollar while the FTSE 100 traded 20 points lower at 5,531

This whole EU project has been dumped on us through stealth and the absence of a democratic mandate, to the point where most of us find it hard to believe that our laws are made by unelected bureaucrats that we can't kick out.Unfortunately this crisis gives them an excuse to go for even deeper integration, arguing that political union is the only solution so to achieve their ultimate goal. The alternative is the collapse of the Euro and, as painful as this will be, I for one will heave a massive sigh of relief.

Very well put Blink and to add, I never understood the enthusiasm for this project. I still cant believe the way in which politicians and legislators forced sign up to the Euro in countries where there was no vote on the issue. I have met plenty of people from these countries who are upset to have been involved.