Will the Euro survive? A question put forth to finance leaders in Europe

My answer to that question depends upon the response from Brussels to other countries fiscal problems.  Right now, Brussels feels a moral obligation to assist countries like Greece and Ireland, and possibly Portugal and Spain and whoever gets into a fiscal jam. 

The question I would ask is why is there a moral obligation to bailout other countries that use a common currency?  The benefits of a currency union, never should have included an insurance policy against fiscal mismanagement. 

There are nations that use the US dollar as their main currency, including Zimbabwe, El Salvador and Ecuador.  Many other nations tie their currency to the dollar, so in essence their currency becomes a dollar equivalent. 

There was no scream for the US to bailout Ecuador when they defaulted on their loans.  What would happen when Zimbabwe or East Timor defaulted? 


That is only way the Euro will work.  It must be voluntary.  It must not include an insurance policy. 

Via Citiwire:
Damian Krzizok, SEB Asset Management, Germany:

'We are sceptical on the structure of the Union, because it is an artificial, political union, not an organic one. We don't think the euro will survive.'

'A two tier union, with a winner currency and a loser currency, doesn't really make any sense. If the thing crashes, it will crash completely.'

Paulo Goncalves, Banco Popular Portugal:

'I think it will survive, but we must arrange a situation to solve the problems of peripheral countries like Portugal and Ireland. If they go out of the euro it will be difficult to sustain it. I don't think a two speed euro is viable.'

'But it would be very very difficult for Portugal to drop out of the euro. Interest rates would sky rocket. If the market turns its attention to Portugal, then I think it will need a bail-out. We don't really have enough stable investors in our bonds.'

Andrea Ciaccio, AZ Fund Management, Luxembourg:

'In the short term it will survive. We are actually bullish on the euro for 2011 and think it will hit 1.20 versus the dollar next year. If you think the euro is dying over the long term, then it must rise dramatically. When it is weak it is great for the weaker countries like Italy and the only thing that can sustain such countries is a weak euro.'

'But in ten years I do not think the euro will exist. It depends on whether Germany is willing to allow a more balanced Europe.'

François Oesch, Banque Heritage, Switzerland:

'The euro definitely has a future. There is space for a two speed euro - I wouldn't be surprised. Germany is not ready to pay for all the excesses of the southern countries.'

'But I think we are now too far in the process to forget about the euro altogether. It's too late. I think we have left the dislocation behind now, but markets are putting the pressure on countries for transparency, they want them to show their cards.'


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