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Thursday, 18 November 2010

Can the Euro collapse?

Well lets just say things are not looking very good as far as the Euro is concerned. The Mastricht treaty which set up the adventure and started the ball rolling was simply unspecified text on a piece of paper. Not many member states have been able to meet the criteria or stick to the so called rules. Europe is simply embarrassed to admit that it was all thrown into a big cooking pot without the right ingredients and with no set recipe!

As a result some of the countries that were encouraged to be part of the Euro zone for political reasons, like Greece, have failed miserably and its people will now be paying a heavy price. The German economy is doing very well as their main trading partners are China and Russia so it could be that they do not need to put up with the problems of having to rescue the Southern states (and Ireland) out so they could either consider abandoning the Euro or change the rules to let the 4 problem states float on their own.

There are of course political consequences if the Euro project is killed and it is clear that real integration cannot take place if there isn't a common currency but is the price we are all paying right now too heavy? Is Europe ready to compete with the USA, China, Russia and India? The argument should be that we should all be more united and face this crisis together but it doesn't look like we can. A more simple solution would be for France and Germany to form a version of a union between themselves and leave the rest of Europe on their own, but I hope this doesn't happen.

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