The Euro vs. the Deutsche Mark
According to a recent poll three quarters of all Germans doubt the Euro has a future. There is a lot of speculation about Germany staying in the Euro or opting out of the Euro and if it is opting out when should this happen? Germany is on a roll with a cheap Euro and my guess is that if they opted out they would become the new Euro as it would more than likely lead to an abandonment of the single currency. Some suggest that the DM would trade between 2 and 3 USD to the DM and who knows what speculative pricing would occur if the printing machines of the X-Euro countries begin to roll. The way I see it right now the Euro is working for Germany and unless the cost of potential bailouts is to high (and I think that means Spain would need to be bailed out) why not roll with the punches I mean Greece is 2% of the European market. You would also have to wonder how Germany could opt out, have there been any rules for opting of the Euro? I think a Germany opt out would make the Euro crash which in itself creates exit problems, liabilities and risks. I don’t think you can make a Greek a German or visa versa each offers its own uniqueness. But I do think Europe can adopt a more federal standardize accounting principles that have a little more bite then present standards. It is a Global Market and you just never know whose toes you might be stepping on and Germany is a major player so the opt out strategy will have a significant effect on a lot of financial instruments and countries
At least I see someone who speak sense on these sites, well done your spot on the money. Ilived in Germany for 11 very long years and they hate having to pay for anything, including a meal for their own wives!!!!!!!!!!!!sad but true!!!
May be every country in EURO is facing trouble as it cannot decide its monetary policy or Fiscal policy. But i dobt Exit route is planned and cost of breaking could prove much higher than the costs of bailouts.
The rumour behind the implementation of a ‘new’ Deutsche Mark has been gathering pace over the past week.
Whilst it would help to buoy consumer sentiment in Germany (we are all aware of the ‘mentality’ of the nation which would welcome any move that gives it more independence away from the collective Eruo-zone), the knock-on effect would be huge.
I do feel though, that the point is coming where Germany are beginning, as a nation to get a bit ‘fed-up’ of being the bigger brother to go to for borrowing, with the periphery nations in the Euro-zone seemingly hanging onto their coat-tails.
I doubt an exit route has been planned already, but wouldn’t be surprised to see a move towards it within the next 2-3 years. At the end of the day, Germany has the power and necessary industry structures to be able to cope with big losses resulting from any partila or full break-up of the Euro-zone. Along with France, should they decide that they ‘want-out’, I have no doubts that it could be made possible.
It helps that Lagarde has now been appointed by the IMF, and the fact it is, yet again another European in charge does give some weight to the possibility of strong support from the IMF in regards to any Euro-zone shake-up that may come!
I have just returned back to the UK after working in Gremany for 11 years and you could not be more on the money with your comments. I would add that the Germans are as tight as a nats chuff when it comes to buying, paying for anyone!!!!
This debate I think is more about the government vs. the people in each of the countries that make up the Euro. For example in Germany (and France to a lesser degree) the people are showing their frustration with ECB funding agreements that only prop up what appear to be eventual government debt defaults such as Greece while on the hand Greeks are sensing that their way of life is being debased by the draconian measures they are force to adopted which in the end seem to benefit countries such as Germany and France. On the government side of the ledger both the German and Greek governments are acting in a way that supports their own best interests, for the Germans a weak Euro enhances their strong economy for the Greeks accepting ECB funding demands buys them time and hope that they can stave off a debt default and I would suggest that neither government position is supported by the majority of its citizens. I think that the root of this problem stems from the disconnect between what used to work in Euro land and what now works in Euro land. In the past the weaker sisters always used currency manipulation to compete economically especially against Germany. Today that has reversed now a cheaper currency i.e. the Euro helps Germany become more competitive globally while the PIGS due to their socio/economic failures are being forced to sell off assets at what will be bargain basement prices. The Euro and the ECB need a major overhaul one that reflects the reality of Europeans and that truly deals with the present failures of both the Euro and the ECB.
I agree entirely with ‘Govt vs. The People’ George! The French and German public are rightly so, almost at breaking point with the being the pot that everyone can dip into in times of trouble.
The biggest overall problem is that it is now clearer than ever, that all-enveloping monetary policy; direct from the ECB to be applied throughout the single-currency area does NOT work. Currency manipulation is probably the most powerful monetary policy tool, and the downside to the ECB is that any form of it, whilst having a positive effect for one or two member states, is detrimental to many others.
Going by that issue alone, the solution is to return to the ‘old’ European currencies for major/strong European nations (Deutsche Marks, French francs etc.), but possibly to have a collective single-currency still for the periphery nations, where blanket policy from a central bank would still be beneficial.
It may be a a little before my time in terms of market experience; so ecxuse my ignorance – but what was the issue with Europe having so many seperate currencies beforehand?
may be German peopl are not willing to sacrifice for all other nations and they want to exit. Are German politicians willing to exit? Euro was always more of political Union and not truely Economic Union.