When the Economist mentions something in several different articles it’s a pretty good bet that the something is in big trouble.
Last week they opened with a potted summary of the emergency support fund being set up by the Euro zone governments in an effort to patch up the radically different speeds which they’re running at. Then there was the leader urging leaders to forget about the option of breaking up the Euro and how dire it would be for a time. Finally, there was the briefing going through how it would be done and how difficult it would be to do.
The problem with the emergency fund being explicitly set up is that everyone knows just how much money is in the kitty. That’s sure to prompt some people to stretch that kitty to the limit whether they be speculators or governments wishing that they could just devalue.
Listing the processes necessary to recreate an old currency is frankly just asking for trouble. As they point out, doing so would cause massive upheaval in the financial markets lasting years and knock-on consequences of the real economy in the country doing it internally and through difficulties in trading with other countries during the change-over period. Unfortunately, those countries are already facing years of upheaval and austerity budgets and moreover their country’s finances will be run by un-elected officials from other countries during that period. Wouldn’t the upheaval in recreating their own currencies be worth it for them? At least they’d be able to have a real say in how their budget was run.
One of the major problems they foresee is the logistics of printing the new currency in secrecy. Unfortunately, there is one Euro zone country that doesn’t need to do that. Ireland’s banks already print sterling notes and one, relatively doable, option would be simply for Ireland to revert to their former linked currency explicitly, at least for a while.
So, will it be Ireland that will pull out first? Whoever it is, they seem unlikely to be the last.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.