May 28, 2005

TRADE YOU A WHEELBARROW FULL OF EUROS FOR YOUR OIL FUTURES:

Politics may doom the euro (Edward Hadas, 5/27/05, CNN Money)

[A] strong French rejection could reduce one life expectancy, that of the euro itself. [...]

[S]uppose the "no" vote wins big, by something like 60 percent to 40 percent. And suppose the Netherlands follows on Wednesday with an even larger rejection.

That could cause something more serious than the usual EU pattern of navel-gazing followed by a vague compromise. The idea that the euro could be dissolved might start to look like a practical possibility.

The unsustainability of the euro has been a topic of dinner table conversation from long before the single currency was created. Many observers feared that the independent central bank would not be able to keep sufficient control on the member nations' fiscal policies. High debt loads might force countries to drop out or be expelled.

The counter-argument to such pessimistic speculation was vague but powerful.


Powerful? It was incoherent.


MORE:
How long can the euro live as an orphan? (Ambrose Evans-Pritchard, 28/05/2005, daily Telegraph)

The prospect of a double "No" to Europe's constitution in France and Holland has already claimed its first victims, catching hedge funds off guard as the euro slumped to seven-month lows against the dollar, and battering Turkish, Balkan and East European bonds.

This is just a foretaste of what could happen once investors start to think through the euro's long-term chances of survival in a "post-federal" Europe that is no longer moving ineluctably towards ever-closer union.

Can a stateless currency hold together in a mere "zone" of 12 sovereign states, with a half-constructed legal base, while its economies are moving in starkly different directions?

Posted by Orrin Judd at May 28, 2005 10:41 AM
Comments

This is gonna be fun.
I think I'll make some popcorn and sit back to watch it all.

Posted by: ray at May 28, 2005 12:43 PM

I work at a major financial services company with a very large foreign exchange operations. Whenever I raised the possibility of the euro slumping or maybe even falling apart the fx people told me I was an idiot and that the euro was going to replace the dollar soon. So I'm waiting to see what these same types say if the current trend continues.

Posted by: AWW at May 28, 2005 2:27 PM

Brother, can you spare a dime?

Posted by: oj at May 28, 2005 3:15 PM

powerfully incoherent ?

Posted by: cjm at May 28, 2005 3:37 PM

And the 19th century was supposed to belong to Canada.

Tell them hope for the best, prepare for the worst.

Posted by: Sandy P. at May 28, 2005 5:27 PM

I've thought for some time that the EU would come to D.C., hat in hand, sometime soon. But not this soon.

AWW:

I hope your domestic folks are better grounded than the foreign desk.

Posted by: jim hamlen at May 28, 2005 10:30 PM
« WHAT'S AL QAEDA?: | Main | SHAME?: »