Weekend Edition: A Euro Zone Breakup?

Welcome to the weekend edition, a small collection of links to interesting personal finance related articles and economic news from around the web.

What’s the probability of dying in a plane crash? That would be the same probability for witnessing the Euro zone breakup in my opinion. It’s still a possibility but I just don’t see it happening anytime soon. The German tax payer can protest as much as he likes for footing the bill of the weakling euro members, the fact remains there is “no way back” from the euro as the German Bundesbank president Axel Weber declared on Wednesday.

If Germany decides to revive the Deutsche Mark, they will have a problem on their hands. The mark will be strong and it will impact their exports. If a member of the PIIGS is kicked out or leaves on his own,  that member will be in worse shape as it will cost him billions in order to revive its currency.

“Investors” should stop being drama queens every time European debt woes make the headline. We’ve seen this movie before featuring Greece and we will see the same movie again featuring the next actor in line (currently Ireland). We know how the movie ends, they will all get bailed out and if the 1Trillion Euro fund is not enough, the ECB will make sure the right amount will be provided (read printed).

I really doubt Europe is that sad for its currency losing value, its exports will benefit! Hopefully on Monday, the “investors” choose to focus on the upbeat sales of Black Friday by coloring the indexes green.

Economic roundup:

Bernanke Goal of Optimal Employment Elusive With Profits Bringing No Jobs

Big Government Not Invited to Thanksgiving Feast

Spain’s PM says no chance bailout needed

China, Russia quit dollar

Davidowitz Says: U.S. to Face Dollar Crisis by 2012

On to our weekly blog roundup:

Invest it Wisely: How MozRank is Filling in the Gaping Hole left by the Departure of PageRank

Canadian Finance Blog: How To Build An Emergency Fund

Money Smarts Blog: Transferring money From One RRSP account To Another RRSP account At Different Financial Institutions

Canadian Business Blog: What some DIYers seem to overlook

Financial Samurai: Living Vicariously Through You

BarbaraFriedbergPF: Why I Don’t Want an iPad

Young&Thrifty: If I were a boy…

Budgeting in the fun stuff: Top 5 Reasons Not to Budget

Investor Junkie: Demystifying Swiss Bank Accounts

The Righteous Investor: American Thanksgiving

Enjoy your weekend!

13 comments to Weekend Edition: A Euro Zone Breakup?

  • Actually, if a member leaves, they could just print currency on their own terms instead of having terms dictated to them by the ECB.

    Anyways, there are really two Euros: The political union and the monetary union. We might see a reduction in scope down the road in the latter, though predicting this stuff is really just guess work. Who would have thought the Germans, for all their anti-inflationary ardor, would be complicit in bailing out Euro member states?

  • Hey Mich,

    I was watching a debate about five years ago–maybe four years ago. And Ireland was being held up as an example of an economy thriving, after struggling for years. I can’t remember what the topic was, that the teams debated. But there was no doubting how stellar Ireland was, economically. This turn around quickly in the world of economics. In fewer than ten years, people could end up flooding back into U.S. dollars. You never know.

  • Mich

    @IIW, I wonder what would the logistics cost for a member to reinstate its own currency? It’s funny how these PIIGS are doing an effort with austerity budgets in contrast to the US who is simply borrowing more.

    @Andrew, long time no see! I totally agree with you, take any forecasts you read with a grain of salt, no one knows what’s coming down the pipe. Talk about black swans at irregular intervals!

  • Interesting thoughts. I’m sure there are a few euro countries that are regretting some of the moves done when the eurozone was first assembled.

    To be fair, some of these countries had issues before they joined the zone, so it’s partly the fault of the organizing countries for letting them in.

    Kind of like if you lend money to a relative who has a long history of not paying it back. :)

  • Mich

    @Monet Smarts, Spot on with the analogy. Some countries indeed should have been left out, time to pay for letting them in in the first place!

  • Thanks for the mention Mich.

    Yeah, the media sort of blows things up to such a grand scale, one can’t help but fear monger.

    Hope you have a great weekend!

  • Mich, good thoughts, I agree that the future on the euro is murkier than a back pasture pond. Eventually, it’s possible that some of the weaker members like Italy will go back to their original currency. It’s certainly been talked about enough, going back to a “heavy” lira. Or, rather, heavy for a little while, until the central bank starts devaluing to goose export growth. Or not. Betting that it will happen even in the long term is a fool’s bet.

    @IIW — it could be that the Germans are doing a little bit of supplier financing and keeping their “customers” afloat with all these rescue packages.

  • Mich

    @Y&T, fear mongering is profitable, fills up the time slots!

    @Andrew, I would not be surprised at all to see some changes in the Euro membership. That might be possible if the same states require consistent bailouts periodically.

  • I had dinner with one of our German distributors about the time Greece was rioting. I asked him if he thought Germany would leave the EU. He told me there was no chance and that the EU would be strong and viable, despite these bailouts. Besides taking a swipe at the French for being lazy, he thought the EU was in great shape.

  • There is definitely a lot of truth in what you say. I think it’s important to judge this one from every angle, and realize that the theoretical (no matter how practical) may not be a possible reality.

  • Mich

    @Bret,

    This is my theory as well, no breakup any time soon! Investors are making money shifting focus from one country to another, sooner or later all of them PIIGS will be bailed out and the focus returns to the good old US of A.

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