The Euro is Toast
I ate this breakfast a few years ago, in Paris, after Europe had converted to the euro. If you look carefully, you can see on the bill tucked under the tray two prices: the euro price and the franc price. They printed them both for a while, to get people used to the new currency.
Which may have been a waste of time. This article from the Times of London, and this one from the Telegraph, paint a very dismal picture of the euro's future.
The euro could be dead in 5 years. A Greek bond default is inevitable. Faltering economies across Europe -- and sluggish growth in the economies of France and Germany, who are required to prop up everyone else -- might put too much pressure on the euro.
I'm not sure a euro collapse would be good for us. Disruption in currency markets never is. But I think it would be bad for Europe. On the other hand, in the short term at least, it would mean a strong dollar, which would make that Cafe de Flore breakfast suddenly a lot cheaper.
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Comments:
Re: The Euro is Toast
It's interesting, Rob. Not long ago I made a (moneyless) bet with James Joyner that we might well see countries reverting back to those dual-currency days, albeit in a less official way. My suspicion is that certain European states -- the Francophone and Germanophone countries in particular, probably others -- could keep the Euro as their official currency while locals start printing up and using, unofficially, the national currencies of old. When I think of the possibilities for lucrative bribes, corruption, kickbacks, and double-booking -- worked into the already Byzantine European culture of bureaucracy -- I get a little dizzy.
May '10
Re: The Euro is Toast
The Euro seems to offend conservatives, although I've never paid much attention to exactly why. Perhaps it's self-interest: a truly united Europe would certainly challenge the U.S. in economic influence, although we've seen that this doesn't translate into military self-sufficiency. Or it may be more principled. American conservatives (what Europeans would call liberals) recoil at concentrations of power that are distant from the preferences of the constituents they affect. So if the Greeks want to pile up cushy public sector entitlements, they should be able to do so -- and the Germans shouldn't have to pay for it.
Now, why the euro-Greek situation is any different than dollar-California (in anything but magnitude, at least) escapes me.
Re: The Euro is Toast
Not sure it is. We've already heard Indiana Governor Mitch Daniels talk about his unwillingness to bail out the big-spending states on the coasts by punishing the taxpayers of his more frugal and sensible state.
May '10
Re: The Euro is Toast
The dissolution of the Euro would be "bad for Europe"? I guess, in the same way that any instability of necessity involves a temporary rough patch. The alternative is to patch it up with chicken wire and duct tape and wait until there's a sudden unavoidable shock, hoping you're dead before that moment arrives.
The latter alternative, of course, is what will happen. TPTB in Euroland have too much invested in the single currency to ever quietly admit they were wrong and quietly slink away.
Of course, their plan would've worked if it weren't for those meddling kids. They planned to have a coordinated gummint and currency by now. Having only half a loaf is worse than nothing in this instance.
I'd just scrap the thing because "euro" is a really weenie name for a currency. "I have confidence in the euro" is not a pronouncement usually accompanied by proud strutting.
May '10
Re: The Euro is Toast
As is often the case, Steyn said it best. A common currency works as consequence, not as a cause, of unity.