Regards, Ivan
Posted on 06/03/2005 4:12:53 PM PDT by MadIvan
THE political crisis that has engulfed the European Union since France and the Netherlands rejected its proposed constitution yesterday threatened to spill over and damage the euro.
Embattled EU financial leaders spent the day defending the currency, dismissing talk of its break-up as “absurd”. One senior EU official said: “Euro notes and coins are for ever, like the euro.”
In a symptom of the seriousness of the creeping doubts, Roberto Maroni, the Italian Welfare Minister, had suggested in an interview with La Repubblica that a referendum should be held on bringing back the lira. The euro had “proved inadequate in the face of the economic slowdown, the loss of competitiveness and the job crisis”, he said.
“Wouldn’t it be better perhaps to return, temporarily at least, to a system of dual circulation of the euro and lira?” He cited Britain as an example of a nation “growing and developing by holding on to its own currency”.
Although the Italian Government quickly distanced itself from Signor Maroni’s views, his comments rattled the currency markets. The euro slumped from about $1.2290 to $1.2231 on his remarks. On Wednesday, the euro fell by about 1.40 cents against the dollar as the Dutch voted on the EU constitution and markets reacted to uncertainties created by France’s “no” vote. That brought the single European currency to an eight-month low of $1.2202.
An economic adviser to José Manuel Barroso, the President of the Commission, gave warning that the situation was “dangerous” and that some countries would want to leave the currency. For the first time financial markets are speculating that the euro may collapse, by offering variable long-term interest rates on government debt in different eurozone countries. However, Joaquín Almunia, the European Monetary Affairs Commissioner, said: “The euro forms part of our landscape. I think nobody is going to succeed in eliminating an achievement that cost us a lot to bring about.”
The markets had already been shaken by a newspaper report in Germany that Hans Eichel, the Finance Minister, had attended a meeting to discuss the break-up of the euro. He denied the story.
On Thursday, Jean-Claude Trichet, the President of the European Central Bank, dismissed speculation about the end of the euro, calling it “totally absurd”and “complete nonsense”.
Many of the countries which joined the euro have suffered economic stagnation and rising unemployment, with people also blaming the currency for rising inflation. Although the German and French economies are stuttering, Italy has plunged into full blown recession.
The euro is vulnerable to a collapse in public support because none of the 12 countries that joined it allowed their people to approve the decision in a referendum. Many Dutch used the referendum on the constitution to show their disapproval of the euro, while in Germany polls show 56 per cent of people want to return to the mark.
A report called The Demise of the Euro by the Centre for European Policy Studies, a think-tank funded by the European Commission, admitted that the currency was probably responsible for Italy’s economic problems, which it predicted would soon afflict the majority of countries in the eurozone.
Confidence in the euro collapsed in the markets after the French and Dutch referendums, because economists believe that it would make it difficult for governments to co-ordinate action to keep the currency stable. The currency had already been hit by the collapse of the Stability Pact which underpinned it. Eurozone governments are now openly flouting their legal borrowing limits.
Regards, Ivan
Ping!
They should take a valium.
panic-stricken, I'd say.
With strong denials like that, I would expect this to happen sooner than previously thought...
If I wanted to place a large bet that the Euro will take a major nosedive over the course of the next year, how would I go about doing that?
This euro devaluation is very interesting considering all the talk in the past few weeks of China shorting the dollar and going heavy in euros!
"I'm not in denial! I'm not I'm not I'm not!"
You might also want to google "bankruptcy" since it could be in your future.
Strange, I'm beginning to feel just FINE about the Euro.
These guys don't have to spend any time comforting me.
I'll give my turn to Jacques Chirac.
I doubt it. I've made some pretty darn good calls - I predicted the relative descent of the dollar a couple of years back, and its recent rise as well; I predicted oil prices would spike then drop after Goldman-Sachs' hysterical prediction (they did), and now I'm predicting the overvalued Euro is going to drop, which isn't all that farfetched as it is already on its way, and the political currents will only drag it lower. Why shouldn't I make some dough from delusional EUrocrats?
Me thinks you're enjoying all this even more than I am Ivan, and deservedly so.
I hope it works out. In order for you to make any money, you need to be highly leveraged in order to make it worth the trouble. The risk is as at least as high as the reward, though, and if you're shorting a currency, your potential risk is unlimited.
The twin US deficits continually cited by the "pundits" is such a canard. Furthermore, many currency traders play the short game against a particular currency, and spout propaganda to the idiot journalists that report their nonsense. It's all arbitrage to them. As soon as the FED started to raise interest rates from 1%, overtime, it signaled that the Euro climb had reached its zenith, especially since the European Central Bank has not raised their interests rates in kind.
The EU smoke and mirrors looks like it's being blown away and shattered.
I have questioned the Euro and even published caution about it before it was instituted. It will not necessarily go over a political vote. The real test will be when the Italian's and French want a little inflation and the German's and Dutch dont. Who is going to give? Or does the Euro give.
It is essential that the strength of the Euro be maintained (at least until the millions of non-elected Eurinal bureaucrats can convert their earned/stolen Euro holdings to dollars).
And a drop of .20 or .30 cents euro cents wouldn't be far fetched . The euro came out at about this level 1.20 to the dollar in 2001. But in 2000 I was in europe and it was more like 1.14 euro to the dollar. So with this little nightmare happening and their economys going nowhere but down . The euro could easily come to parity with dollar. Maybe ;-) Maybe the dollar beats it....
I'm convinced that European economic fundamentals, without major liberalization, must necessarily cause its currency to trend negatively against those of capitalist nations. Its welfare-state situation has yet to come to fruition, but it will come a lot sooner than ours, with the inevitable consequences.
What about all the exaggerated claims of the Euranuses a few years ago that they would be the greatest SuperPower in the world. It is astonishing how a great Empire can collapse in a week before it is even an Empire.
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