Who knows this site also knows that we do not have a shimmer of trust when it comes to the Euro as a currency. When you listen closely to leading economists, including main stream German economists, there is a wide spread consensus the Euro’s only real backing is political drive. When the Euro fails, Europe fails is a dictum of Mrs. Merkel. Indeed the Euro was bullied upon the Euro zone populations as one of the tools to transform the EEC into the EU, to go from a cooperation between European states to a centralized European superstate.
The reasons why it does not work are too many to sum up here. What matters is that the UK never got in and that now Italy realizes that it will never get it’s economy back on track when it keeps the Euro. By now everybody that understands just a bit about macroeconomics and financials knows that at a certain point of time there is no fix left for the cripple currency and it has to be abandoned. It will not be split in a North- and South Euro as many proposed. Also it will not be in a system where it will disappear as a settlement currency between countries that all go back to their own currency system and central banking. It will disappear and loose any function.
Some people believe that if Macron can force the EU into being a transfer union all will be equaled out. This is not the case. By transferring wealth from Germany to France and Southern Europe these areas will not be able to repair their economies and become competitive with Germany. They need devaluations and setting their own interest rates. Anyway: the idea can not be sold in Germany long term. The Gutmensch stops being Gut at a certain point.
A good indicator that the Euro is about to go into the final years of its existence is George Soros seems to be betting against it (some say that is not true – but name me only one significant investor with notable Euro-reserves!). The time span the Euro remains depends on political force only.
Maybe that is a question Xi will ask Merkel, since she is on her tenth visit to China. EU media explain this visit as an approach from China and EU to counter the Trump administration. That is nice lie. Xi understands well he receives the most important European but not the ruler of Europe. He also knows BREXIT took place and Italy is at best a risk for EU and German ambitions. China is slowly decreasing it’s USD exposure, not to make the same mistake with accepting Euro as anything near to a reserve currency. Still it has some interest in Euro since the last 15 years Chinese investors massively bought ailing European companies.
Economists in fact are already very busy to develop scenario’ s about the demise of the Euro. Not since yesterday – already for a long time, since there actually never was a time the Euro made any real sense except as a political move.
A nice example is the study from Roger Bootle of 2012 (Click the picture to find it)
Many economists in Germany rightly believe the Euro was used to disown them, to take as much of their savings as it could possibly swallow. Some suspect that a next phase is considered: despite all propaganda of the Merkel administration to keep the Euro at any cost the top anonymous financial elites of Germany are busy with a plan how to dissolve the Euro. That makes sense: If this Merkel administration decides to get into the Macron proposed transfer Union it is writing of debt anyway. Not being able to force other Euro zone countries to repay debt in Euro makes the Euro obsolete for Germany.
The prospect of keeping the Euro is the continued deprivation of large parts of the European population and it is a verdict on any necessary economic reform in especially the South of Europe. It can work a decade or so: transfers will compensate until Germany decides that enough is enough. The prospect of dissolving the Euro is also a difficult scenario. It will happen overnight and the Eurozone population will be taken by surprise. It will not be a decision of the ECB or EUCO – they will be informed at best two weeks before it goes down. It will be decided by people in Frankfurt that nobody has ever seen but that hold all the strings. And it will be executed in a very well defined scenario.
The chance this will happen gets bigger all the time. The surprise will be to many that the Euro will not collapse because some Eurozone nations pull out, but because Germany will pull the plug when it sees the tool does not longer work…