What the end of the Euro will mean Practically

I think that the end of the Euro as a pan national currency is very much on the cards. The recurring sovereign debt issues together with appropriate analysis even by historians (see Norman Davies's article in the FT on Saturday October 29th) bear this out. The only way out would be for the greater EU, those EU countries that have the Euro as their currency to become more like the United States. Why do I say this? Well if you look at the US it is clear that the different states have different economic conditions and economic strengths and weaknesses, from the highly industrialised states to those which was large agricultural and also tourism led. This is largely the same in Europe. Germany and then France are the two strongest and largest economies but they largely consume only from within their own "states". Yes the abiltiy to trade goods and services across these nation state borders has made economic flows move more in terms of volume and faster but this is not worked as otherwise places such as Spain and to some extent Italy would have used their strengths in terms of products that it produces best in terms of quality and quantity to improve their overall wellbeing. Perhaps these monetary flows have not been spent wisely over the 10 years or so that the Euro has been in full usage and from the instigation of Schengen.


So what is going to happen. There could remain a Euroland made up of probably Germany, France, Benelux, and possibly Austria and Finland. However, the smaller countries together with those already impacted will probably need to go back to a national root currency and work from there. The issue and this can also be seen in the US is that if the "states" do not look after their own finances in a "reasonable" way by ensuring debt can be repaid and that short term needs are financed by short term inflows, with longer terms requirements similarly finance to longer term cash flows, then then even there states have declared Chapter 11 styled bankruptcy and the markets have allowed them to start all over again with a clean sheet. I am not sure this will be the case here in Europe.


For Jim Bloggs in the street it will mean going back to multiple currency requirements instead of just using the Euro. So the winners will be the money bankers or travel exchanges creating a possibilty of increased commissions, or worsening exchange rates being offered for tourist and even business transactions with a widening of the effective buy to sell exchange rates. How long it takes for this to become reality could be from a matter of days or weeks, to a few years as countries attempt to keep alive a failing currency (just like failing businesses). Unless a real change in direction and the absolute ability to raise taxes moves from the nation state to that of the European Union, then a significant demise of the Euro is warranted. As the major players are all nation state leaders, it can be assumed that they would not want to see their powers and prestige diminished and that is why this is not going to happen. Therefore the loss of blood cannot be stopped and the current tactics is only delaying the inevitable. Unfortunately, the current UK government can only gloat and act like what they are and as we are seeing trying to make advantage during this period of crisis and chaos. RIP Greater Euroland.