The End of Eurozone? It is common knowledge that markets discount some major developments. If we see the graph below, of EUR to USD rate, and see just the icon, just the graph, we’ll understand that this is not just a simple downtrend but a collapse.
The prices of Euro, were in year 2012 in upper levels than today’s, although that in 2012 the crisis was more ‘fresh’. The years passed, we came today, the weak Europeans States took severe austerity programs to fix their financial health, they did it till a point (reduced expenses, achieved primary surpluses) but then, why the Euro is really collapsing?
It doesn’t have to be an expert, to understand this. The graph is yelling.
So what is happening and how is explaining this euro collapse if the financial status of the European States is now better, comparing the year 2012?
In every situation that has a community, a union of people, the union lasts for as long it remains healthy for everyone. The union lasts when it serves a win-win condition.
If in a relationship, someone lose in a permanent basis, then has no interest to stay in that relationship and the relationship breaks. This happens in a relationship of just two people; imagine how complex this evolves in a relationship consisted of 19 States.
In such complex situation as Eurozone is, in terms of people there has been developed a huge inequality and a huge injustice. You can not have for a long time, people that impoverishes (in southern Europeans States) and transfer wealth from the generally poor South to the generally wealthy North.
In a family, if you like to stay united, you help the weak member and do not punish him. Now, in Eurozone, especially thanks to the German ( = Merkel, Schäuble) approach, they have chosen to punish hard the weak southern members (the people of them). But that leads sooner or later – now is seems that it’s sooner – to the breakup of the ‘european family’.
Eurozone today is in a huge imbalance and Merkel and Schäuble are responsible for this.
It’s obvious that big and powerful speculators (call me Soros etc) have seen this fundamentally imbalance and betting in Euro demise, as also every one else, is leaving Euro.
So Dr. Schäuble keep on the good work or change policy, to a way that will strengthen the European family.
This way, would be a real European friendly way and would have mainly:
• partial Debts write-offs for the overindebted States and
• the opposite of what happens today, that is liquidity transfer from the northern wealthy States to the weak southern States accompanied with connected non-recessionary financial/economic reforms to strengthen financial health of States but also boost competitiveness and employment.
• quick federalization of Eurozone in the US standards; that means Eurobonds; the debt would be European and the ECB and central European government, would share the money according the needs of its States, driven to smooth imbalances among the Zone.
From the above graph of Euro rate, someone can easily understand that what it is playing now, it’s not the Grexit but the Euro Demise itself.
So dear mrs Merkel and Dr. Schäuble, do you understand what everybody else can understand? … and would you like to change to a real European friendly view and approach or you want the strong speculators keep punching mercilessly all Europeans, including Germans? Unless you do not realize what is happening…
Panayotis Sofianopoulos
Economist
TaxCoach Contributor
27 March, 2015
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