Fears of German exit from EMU
weak states cannot easily leave EMU because they would pay a stiff penalty in higher rates, would be stuck with euro debt contracts, and might need controls to stem capital flight. It is a different calculus for Germany, which would see lower rates and might view EMU exit as the only way to ensure monetary stability.”Obviously, we have not reached the end game yet. However, with the latest developments, such a break-up scenario has clearly become more likely. The risk is far from negligible and the consequences for financial markets would be very severe. Investors ignore the break-up risk at their peril,” he said. (via Morgan Stanley fears German exit from EMU – Telegraph).
How many Euro-currencies …
A super-dense, power-currency, union between France, Germany, Italy and UK may have a chance of survival. At least, Joachim Starbatty, a professor emeritus of economics at the University of Tübingen, seriously proposes that Germany withdraw from the EMU. In which case what happens to the Euro? Will it become a 2nd-class currency of the Euro-zone?Will Europe splinter into another 20 currencies?
Turning the clock back, to recreate a German Deutschmarks, surely the Germans realize, is the last resort. A en flambé Europe may justify such a last step. Europe is at least a few decades away from such a situation. Unless the gentle decline of Europe gathers significant pace, such thinking will be defeatist. Europe has invested too much and gone too far down the road to turn back. In a stressed financial sector, mandates are difficult and far in between.
One way to draw attention is to give out such reports.