In our recent podcast on the euro, we discussed the possibility that the preservation of the European single currency might depend on weaker nations, such as Greece, leaving it.
That possibility is now being taken seriously by the markets.
It is, however, curious that they expressed their concern by devaluing the euro against the dollar. Logic dictates that the euro should be worth more if it does not have to underwrite the budget deficit of the spendthrift Greek government.
It might be the best thing that could happen to the euro if Greece left it for a while, followed by Portugal and perhaps even Spain. Those are the countries which ran up the worst government deficits – despite the euro’s supposedly strict rules – and which are still reluctant to tackle them. Ireland also ran up a horrendous deficit, but seems prepared to take firm measures.
Needless to say, there are vociferous official denials. Equally needless to say, those denials are not being believed.
The authors of this blog are not currency speculators, nor are we qualified to advise others on currency speculation, but, if we were, we might be tempted by the prospect of putting surplus cash into euros.
Something has to be done. Something is going to be done. If the Greek government and the other basket cases do not do it, someone else will. The Germans are getting impatient. When they act, the euro will be strengthened – and they will act soon if no one else does.