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Worldcrunch

Why We Need To Prepare For The Euro's Demise

Article illustrative image Partner logo Endangered species

ANALYSIS - We need to prepare for the euro's downfall. Five years ago, this thought would have only been imaginable to a fantasist or an extremist. Since then, however, there has been the euro crisis and Greece's economic earthquake, whose aftershocks could be felt in Ireland, Portugal, Spain, Italy and even France.

The first remedy advocated to counter the disastrous effects of these seismic shifts was the possibility of expelling the euro zone's worst performers. An idea that German Chancellor Angela Merkel has toyed with since spring 2010, leading Austrian ministers to respond by suggesting that European governments were exploring the option.

The second solution is more radical. It does not focus on one particular country, or even a handful of countries, but on the euro zone itself... and its break-up. This idea was primarily envisaged by gurus and experts; however, since last summer, when Spain and Italy were under intense pressure over their financial markets, this break-up became a working hypothesis. Primarily in the private sector - amongst banks and chief executives of leading businesses - it has now entered into the public sphere.

The Finnish Minister of Foreign Affairs, Erkki Tuomioja, let the cat out of the bag last week when he said Finland's government was preparing for the eventuality. It is true that the Finnish, who have been among those most supportive of the euro, are now among the most disappointed - an opinion which they show vigorously through the power of the ballot box.

This slow change in opinion, where the unimaginable has become the conceivable, if not probable, is undermining the common currency. But currency is not like other man-made constructions: it depends primarily on trust, which is certainly the case for the euro more than the dollar, the yuan, the pound or Swiss franc, because it is the first major form of currency created without a material foundation, like gold or silver.

With the monetary union's infernal machine, European governments are trapped with only one dreadful alternative. Faced with the economic crisis, not preparing for the fall of the euro would demonstrate inconsistency, or rather recklessness, whereas preparing for the euro's demise increases the probability of the dreaded event.

During the last century, Europeans were confronted with a similar dilemma on two occasions: whether or not to go to war. We know what happened, so they should have learnt the lesson by now.

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About this article source Website: http://www.lesechos.fr/

France's top business daily, Les Echos covers domestic and international economic, financial and markets news. Founded in 1908, the newspaper has been the property of French luxury good conglomerate LVMH (Moet Hennessy - Louis Vuitton) since 2007.

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