The Euro is Dead

BySandro Boeri

How advanced are your EFP projects? 

By this I mean the Euro Fragmentation Project! 

You may think that I am bordering on lunacy but I remain convinced that a number of countries will be forced to leave the euro system following yesterday’s fudged announcement. 

The Structural Case 

The euro is doomed to failure for the following reasons:- 

  • There is no cohesive political structure that supports;
  • Decision-making is fragmented;
  • Transfers from surplus regions to deficit regions is too difficult;
  • The German taxpayer will tire of subsidising profligate fellow Europeans.

Nicolas Sarkozy has more or less acknowledged the weakness of the system by expressing the view thatGreeceshould not have been allowed to join the system. On his logic, one wonders ifIrelands,Portugalor evenItalywould have qualified. 

The Short Term Case

I believe that a number of countries will be forced to leave the euro system for the following reasons:- 

  • Yesterday’s announcement has too many loose ends:-

-The exact nature of the haircut;

-The Greek bail-out;

-The exact funding and operation of the EFSF.

  • The markets will attack the structure again within one week (look at Italian bond yields).

 The Consequences for You

We had c. 3 years to prepare for the advent of the Euro which saw the light of day on 1st January 1999. 

Financial institutions engaged in elaborate projects overseen by regulators. 

You have c. 6 months to prepare for EFP.

 Are you playing ostrich? 

Please send your comments to [email protected]

Similar Posts