Ambrose Evans-Pritchard: Will The Euro Survive by Christmas?

I once had someone from Britain tell me that the euro was doomed because, he said, most of the countries making up the euro-zone couldn't stand each other. I don't know if he's right -- just one person's opinion, you know -- but the current crisis looks to put a lot of stress on the euro at the very least.

In fact, Ambrose Evans-Pritchard wonders if the 15-member euro will survive by the Christmas.

Interesting bit:

An ugly recession is coming, as debt leverage kicks into reverse. The purge will be slow and punishing. Some 12 million Americans are already trapped in negative equity, but at least they can see where this might end. After much drama, the US institutions have risen to the challenge. The Fed, the Treasury, and Congress have managed to take some sort of coherent action. The jury is out on Europe, where the hurricane is now smashing the banking system.

Those such as German finance minister Peer Steinbruck – who thought the sub‑prime crisis was just an "American problem" – have had a rude shock.

And this article comes just as central bankers are cutting rates. I'm no interest rate watcher, much less an expert on the subject. But the idea of cutting rates here, raising them there, playing "maestro" to giveth the punch bowl and then taketh away never rang true with me. I mean, the notion that someone like Alan Greenspan could be a maestro and direct the economy like a conductor with an orchestra seemed a bridge too far. Too top-down.

I wonder how all this plays out. Then again, we all are.

Comments

[Sivaram Velauthapillai]

I remember a few years ago when Jim Rogers said the Euro was doomed, I thought it was the dumbest thing I ever heard. I still think it's highly unlikely but it'll be interesting.

It's funny how things work. When the Euro first came out, it kept declining against the US$ and everyone thought it wouldn't work. Then 2 or 3 years ago we had the US$ decline sharply and everyone thought the Euro was going to overtake the US$ as the premier reserve currency. And now, well, I guess people are bearish on the Euro.

[Duude]

It is indeed difficult keeping a common currency while sovereign nations are dependent upon concerted action to fix anything. How is it that they haven't taken note of the difficulty the U.N. has to pass anything but nonbinding resolutions? When does all the veto on the security council ever agree on anything? The solution will be either separate currencies or European nations will have to agree on one bank making decisions for all of Europe. That seems highly unlikely.

[John]

Sivaram: My recollection (which may be faulty) is that Rogers has at times been bullish on the euro in the short term, but bearish on it for the long term. Maybe his views are based on where it is versus the US dollar. Or maybe these things just go in cycles.

Duude: I'm over my head here, but I'd go for this: let all the European nations print their own currencies and let them be used across borders, if a local merchant is willing to accept it.