A Stupid Question: Will the Eurozone Really Break Up?

Yes, many will argue that’s a stupid question. Yes, leaving the eurozone will be very costly for any party involved. But I begin to wonder.

There’s the rumour that French President Nichlas Sarkozy threatened to pull France out of the euro if Germany refused to provide financial assistance to Greece. But that’s part of a broader story.

The main issue is the price of stabilization, not the bailout price. That’s what Albert Edwards, the Societe Generale SA strategist, said a while ago. He said that unlike Japan or the U.S., Europe has an unfortunate tendency towards civil unrest when subjected to extreme economic pain.

The point is that it’s not about Germany refusing to play its traditional role and make concessions. It’s about the inability of governments to sell sufficient austerity measures to their publics.

Former Federal Reserve Chairman Paul Volcker has also warned about potential disintegration of the euro; there are other voices warning about it.

In such cases I always go back to the eight Eurointelligence scenarios for the “euro meltdown”. Today it is not funny to read.

5 responses to “A Stupid Question: Will the Eurozone Really Break Up?

  1. derekinfrance

    No! It’s about “market confidence”. Either that or it’s market players pushing the game – hoping to influence the outcome so they can cash in.

    The market was rightly concerned about Greece’s ability to turn over (and repay) its sovereign debt. But then there was contagion. Other countries (Spain, Portugal, Italy) – despite having lesser debt problems than Greece – were now considered “shaky” investments.

    But then worse. There were fears that the whole Euro zone would collapse – with stronger countries pushing aside the weaker (?excluding them from the Euro), etc.

    Let’s get this straight. No-one can afford to leave the Euro (the markets would crucify their economies). Sarkozy (hothead tho he is) has never threatened to pull France out of the Euro, for the same reason.

    Some time ago J-P Raffarin (then PM of France), asked to comment on the street protests over one of his policies commented: “It’s the French way” ie they need to get their anger/frustration/whatever out of their systems – before buckling down and accepting it. Just note who are the protesters (trades unions mainly?), what proportion of the local population demonstrate on the streets, and you get a more balanced picture.

    Living “in the eurozone” and living with a clearer sighted view (I propose) than the market players, I’m not so pessimistic as they seem to be. Tho I admit they have more money to bet with than me.

  2. It’s not a stupid question but it is extremely unlikely.

    The individual countries of the Eurozone are committed to the European project and in short, they are stronger together than they are apart.

  3. Pingback: bloggingportal.eu Blog & Support » Blog Archive » The Week in Bloggingportal: Obama saved Europe

  4. Pingback: Who is the New Greece? | European Union Law

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