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BERLIN | Thu Nov 25, 2010 10:56am EST
BERLIN (Reuters) - Contagion spreads from Ireland to Portugal and then to Spain, forcing European leaders to exhaust the $1 trillion bailout fund they set up only half a year ago to defend their ambitious single currency project.
Sniping within the 16-nation euro zone mounts and popular support for the euro erodes as German taxpayers rebel against a series of costly rescues and austerity fatigue in the bloc's periphery reaches breaking point.
Eventually one or more countries decide enough is enough and break away or are forced out, reintroducing the national currencies they used before tying their fate to Europe's audacious economic and monetary union.
Unthinkable only a few weeks ago, a small but growing number of experts now believe some version of this nightmare scenario could become a reality for the euro zone if policymakers fail to unite behind a more forceful strategy for saving the euro and address investor concerns about fiscal and economic imbalances.
Until now, doomsday predictions of a euro zone breakup have come mainly from Anglo-Saxon skeptics, some of whom saw the single currency bloc and its one-size-fits-all monetary policy as fatally flawed from the very start.
Over the summer, British economist Christopher Smallwood of consultants Capital Economics produced a 20-page paper entitled "Why the euro-one needs to break up" and U.S. economist Nouriel Roubini, alias Dr. Doom, predicted euro members would be forced to abandon the single currency.
But as the second wave of Europe's debt crisis gathers pace, engulfing Ireland and heaping pressure on Portugal and Spain, a new group of doubters is emerging. They believe it may be difficult for the euro zone to hold in its current form, even if many think that remains the most likely scenario.
Some, like Financial Times commentator Gideon Rachman, say Germany could bolt if public frustration with bailouts mounts or if Berlin is unable to convince its euro partners to back its controversial plan for a new permanent rescue mechanism.
Dissident academics have challenged the legality of German participation in the Greek rescue in the Federal Constitutional Court. If they won, the impact on the euro could be devastating.
Others see a risk that economic divergence between Europe's stable core and debt-saddled periphery could end up splintering the bloc into a two-tier "Euro-North" and "Euro-South."
Still others believe Germany could engineer the expulsion of euro weaklings like Greece that it feels should never have been allowed in.
"I don't think we'll see a breakup of the euro and Germany returning to the deutschemark, but what we could see is a more homogeneous euro area purged of its low performers," said Domenico Lombardi, a former executive board member at the IMF who is president of the Oxford Institute for Economic Policy.
HUGE POLITICAL WILL
These voices still represent a small minority and few of the skeptics are convinced the euro zone will fracture anytime soon.
Close observers of Europe, and the policymakers charged with defending the euro, dismiss the possibility of a breakup out of hand.
Someone missed the game plan here!
Ireland were out manoeuvred by Germany with the help of France dropping Irish bond values and happy go along from UK all of whom will make money the bailout on the lending margin plus more again with Spain & Portugal as they get out manoeuvred too. Dropping the Euro into the bargain while appearing innocent of currency manipulation is brilliant news for Germany et al and very bad news for a struggling dollar in terminal decline coping with being irretrievably in debt to the Chinese who are also screwed as they also get out manoeuvred by Germany who aren't holding trillions of potentially valueless dollars!
If you want to take the thinking further then think about Russian Rubles for oil sales to Euro EEC on the Petersburg Exchange with a stark reality that behind China both Germany and Russia have the next most hard cash reserves with strong future values in currencies that can last unlike China. Germany now dominates EEC with sovereign rights over Ireland, Spain and Portugal with a sycophantic France sticking close by.
If you have lived in Europe since the EU was initiated and then became a political con job ending with the installation of the euro, it becomes clear that what was a brilliant idea 40/50 years ago has been completely corrupted. It’s now merely a system to keep those who lose elections very profitably employed and to keep a host of busybody bureaucrats off the dole. It drains an unbelievably mass of money from the wealthier countries and doles it out in strange and mysterious ways. I have never once heard a logical justification for the euro beyond the simplistic “It is easier to figure out for tourists.”- as though calculators had never been invented.
Europe’s strength was in its diversity. The euro is a symbol of its attempt at uniformity, the politician/bureaucrats’s dream. Uniform people become uniformed people. Uniform people are compliant and easier to control.
Given the complexity of the countries that comprise Europe, the very idea of forcing them into the euro was an error of small minds. As the current film INSIDE JOB demonstrates, economists really don’t know anything and the people who handle the money flow of the world have turned to milking the system. The old system was not broken and should not have been fixed. It should be revived. It’s like the new visual strip search body scanners at American airports. An insider, Michael Chertoff, was a political hustler and Sold something that was only the answer to enriching a few people. It has nothing to do with betterment (which is a requirement of Progress.) Nor does the euro – and I deal with international trade on a daily basis.
The time for a myriad of weak and strong currencies in Europe is over. The choice that we europeans face is between a mark-led eurozone or a somehow artificial but at least consensual single currency
EU breakup is mere wishfull thinking. We can´t rely any more in a multitude of single currencies throughout Europe struggling for indexation.
The Euro never was a “brillant: idea, but one inspired by Germany to auure and amplify their export market, with the support of the French which still have not realized that they are not longer great power (polical nor economical), enthusiastc support by the weak countries which saw there a posibility to make a better leaving at expenses of the strong one and of course, european nationalistic people which dreamed to displace the US from theitr throne.
What happened as exactly that: Germany and some northern countries, more developed and productive, sellin happily to the weak ones, the latter, rising their living standard and espenditures far beyong their real income, by also happily increasing their debts, until the bubble began to leak.
And as long the less productive and less developed countries do not approach REALLY their level near the richer one, they can spend trillions, implant a common fiscal policy or do whatever they want, this would only delay the debt of the EURO
The EURO took away from the weaker countries the only effective instrument to compet, i.e compensate their weakness by proportional drvaluations
A less developed region, unlesss it have natral resources as oil, cannot compete with a more developed at equal conditions, as long both insist to remain independent countries. Of course, this works if they are provinces of a sole country, as the US!
Cosmetic remedies as the EURO do not achieve anything on the log run!!
There are other reasons, but above is by far the more relevant!!
Sorry!! I realize that I have posted with several typos, the worst where i say “the DEBT of the Euro” instead the DEATH of the Euro”"
The U.S. has pumped U.S. $ 600,000,000,000.00 in the American economy. What if the E.U. would inject the similar amount in Euros in the European economy, helping countries in difficulty, while promoting reforms and budget adjustments to the member states?
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