De-Lurking on the Net

January 1, 2012

Euro ‘s Survival V Extinction

Filed under: Europe — Geekay @ 11:38 pm
Tags: , , , , ,

It was mild 31st Dec though a steady drizzle was  falling down when we moved into London from M4 to celebrate new year with another family. But once ensconced into the family’s home sofa, I could think of nothing but indulge in non-stop debate about Anna Hazare, Euro, Pakistan, Space Research and plenty of other subjects. What came to fore was to debate on Euro and my meek surrender in the end that neither the politicians nor the so called economic experts as well as me do not have any clue which way the Euro will end up. Will the euro break or survive, that was taking whole of the evening away from following the shining fireworks on TV. I was insisting that it will survive and the chap opposite was saying – No, it won’t. If you are living in UK, it is hard for anyone to be optimistic about euro survival by following the majority of media publications and debate on radio/TVs.

The issue of Euro, I thought will be decided after a few elections take place  in next 2 years in Germany, France, Portugal, Spain, Italy, Greece etc. My view was that the number of govts will change and the new left wing governments will come to centre stage and the real consolidation of Europe will begin as Mrs Merkel is dithering at best at present. The breakup will also involve loss of the export market for Germany and sudden growth of unemployment as their new currency will become expensive. The banks in both Germany and France will need a big bailouts as they have lent too much to these countries in trouble, so it’s in Germany ‘s interest to make Euroland more cohesive. The country who opposed everything was UK as it will stay outside the main club, so the new Euro centre (ECB) will begin levying the new taxes and raise the debt and lend it to every country. But it all obviously depends on the sagacity that will come to the new leaders after the pressure of  few more market crises . I thought the market integration in Europe is too deep rooted now to even contemplate of a breakup. I also thought that all these indebted nations will either defer the interest payment (default) or will have their extra debt written off – the so called haircuts as was done recently by Germany and French banks. So, excessive indebtedness of  PIGS will not make these PIGS economies unsustainable after the hair cut. Also, I thought, US will start rising again by the end of next year(2013). The chap arguing with me thought there is no hope because these countries can not carry on spending  more than their earning which they have been doing until now and the media is highlighting this in UK.  So, the debate remained inconclusive as I could not convince this other person that the new found ability of these countries (PIGS) by meeting the debt repayment cost  due to new heavy hair cut will prove decisive enough as I thought it will extinguish the debate of euro extinction for a very long time. But the euro survival  hinges on taking some decisive actions by EU leaders at right time. Having a club of 26 countries means everyone wants to defer taking actions until they are forced. So, the saga will roll on for at least 2/3 years.

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