Strains Tearing Euro Currency

Copenhagen, Denmark and Hamburg, Germany — The Eruopean single Currency or Euro has been in circulation throughout the 17 countries of the EMU (European Monetary Union, which is not congruent with either the original European Economic Community nor the so-called European Union) and has become a fact of life in these countries for almost ten years now. This does not mean it will last for another ten years though, at least in its current extent.

Even apart from its brainlessly reality-blind name Euro and other signature marks of market-detached bureaucrats trying to usurp a more or less liberal culture in Europe and turn it into some boardroom-engineered European super state, the Eruopean single currency was not such a brilliant idea in the first place. This was already obvious in the run-up to the introduction of the single currency when mainly two different camps of member countries kept fighting about the peculiarities and rules about fiscal discipline, public debt and other economic details. Back then, it was mainly a “soft euro” versus a “hard euro” approach.

Today, it turns out that even that was not enough and that Greece managed sneaking in to the single currency by intentionally and fraudulently presenting false economic data in order to conceal its actual ineligibility for the “club”. In order to not lose the “prestige” of a big club, the bureaucrats did what bureaucrats always do: acting to, if only in the short run, extend their power by not overly
scrutinising Greek numbers and accepting the wrongdoers in. Not only do they now have to fix the damage thus caused, they even are faced with a renegade single currency member whose mobs are blurting out smear words against “the rich northern” countries, making ridiculous demands for more bailout money and running amock in the streets of Athens in order to make it clear how “grateful” they are. Quite a mess to sort out so far. Situations like this are not uncommon if “solutions” are forced upon the market, particularly if no one aked for them. In the case of Europe, a common market was a good thing. Free trade always is. Free movement of goods as well as workers and businesses across borders is what people in Europe want, and they were glad when this became a reality. That did not mean, however, that anybody would be willing to accept the introduction of a super-state taking away all the other liberties, particularly those that were taken for granted. But such is the nature of liberty that you lose it once you stop fighting for it. Little wonder then, that Eurocrats kind of forgot to hold a referendum on these questions in most of the countries concerned and, that way, tried to avoid making too many headlines of it. Some still did notice though. Judging from recent events, it may be more than just “some” as the general mood is getting hotter over those matters where markets still matter after all and thus individuals realise they have some power left to influence things. These include the entire sovereign debt area where there are always to sides to a deal and self-righteous governments can do very little in financing their extravagances unless there is an
other side willing to lend their money. This is exactly what is becoming increasingly hard — or expensive — to find. Making matters worse for the bureaucrats, their brilliant engineers designed the whole monstrosity around a tiny little flaw, leaving out any agreement on a uniform bond market that helps covering weaker members from individual exposure to the sometimes cold winds in the markets. This is exactly what happened, with interest rates on Greek government debt reaching 30% earlier this week. Concerted efforts or bailouts as happening over the past year in an attempt to avert an even deeper crisis are not likely to happen indefinitely. They have been financed by some sort of special pan-Eurozone “war bonds” anyway, and there was as little authority for creating those as there was for creating the European “Union” itself: one conveniently forgot asking the electorate in both cases.

The problem has been kicked down the road for some time and has grown even bigger in the process but cannot be solved that way. An even bigger mess to sort out. It is increasingly unlikely that things will go much further that way. The man in the street in Greece rightly seems to be the first to get uneasy: financialnewsroom.com have already mentioned safe-haven buying of Gold in Greece yesterday, including travelling out and increasingly more popular purchases over the internet for better privacy. Strangely enough, this has not been more widesrpead throughout much of the rest of Europe so far.

With uncertainty looming over the future of the single European currency, one might be well advised to think about appropriate asset protection measures though. A breakup of the single currency into separate currency blocks does not seem too far away. Currently, there are two scenarios that are most likely: either a separation between North and South with Greece, Portugal, Spain and Italy out on their own or even three areas consisting of an additional block of the core European countries plus a third one made up of the British Isles and Scandinavia. While the latter seems to be the British approach and was even mentioned between the lines in Parliament earlier this week, financialnewsroom.com’s Hamburg and Copenhagen contacts report on the Scandinavian point of view where stable-currency Eurozone countries Austria, Finland, Germany and The Netherlands might also consider joining with current outsiders like Sweden or Denmark.

Whatever any changes may finally look like, it appears likely that some realignment will take place. This should teach those who thought themselves smarter or more powerful than the markets a valuable lesson — literally valuable for all the wasted money that could have been saved by staying away from such a preposterous project in the first place.