Sunday 19 August 2012

HOW LONG WILL THE EURO LAST ?



History could retain this coming week as the crucial moment in the life of the EURO !!!

There are many reasons for this.  First of all, Angela Merkel and François Hollande will meet this week in Berlin for two main reasons;
   -  to discuss the urgent request by Greece for more favourable repayment terms for its debts and perhaps another loan.
   -  to consider any modifications to the "Treaty of the EURO area Monetary Union". 

This treaty is planned to enter into force on 1 January 2013 if twelve Countries, which have the EURO as their currency, have ratified the Treaty.

Ratification of this proposed Treaty is not as evident as might be hoped !!!   If Greece does not get what it wants, it will probably readopt the Drachma and all its EURO debts will be devalued by at least 50%, just like in normal devaluations or company Bankruptcies !!!

Spain and Italy are two large countries on the verge of requesting financial aid.  Will France be prepared to help ?  Will Merkel get the green light to carry on with more bail-outs ?  She faces General Elections in Germany next year !!!  She has already lost her henchman, Nicolas Sarkozy, but will she now be able to rely on his successor, François Hollande ?  This is not yet at all clear !!!

Finally there are two other countries which have already received aid:  Ireland and Portugal.  Will they sign up to the proposed Treaty without questions ?  The Treaty states that 12 members of the EUROZONE must ratify the Treaty for it to enter into force !!! 

It is early yet to speculate.  However, it seems the Monetary Market, Banks in fact, are not very keen to lend Euros to each other !!!  Not to have EURO monetary assets appears to be sound management !!!

                                            .



No comments:

Post a Comment