In one of our recent posts (Will Germany kill the Euro?) we spotlighted the question whether Germany might turn away from the Euro und thus start off a destructive process of the Euro currency. Besides that scenario, another way would be to downsize the Eurozone. Thus, the question is if this development can been judged as likely and if so, which states would have to be kicked out of the Euro group?
In a recent statement posted on businessspectator.com (Eurozone will eventually be smaller: Roubini), US economist Nouriel Roubini rings the alarm when he said that “Eventually… [a smaller Eurozone is] likely, but before some of the weaker members exit the monetary union, the more likely scenario that’s going to affect the markets is a corrosive but orderly restructuring of their public debts.”
Roubini, one of the few who had warned markets in advance of the outbreak of today’s crisis, thus does not stress that the Euro currency will be history. But he rather suggests that troubled members would need to abandon the Euro.
One can say that this strategy may lead to a stabilized Euro, to a faster growth for the remaining member states and also to faster recovery for the troubled states such as the PIIGS.
But which of the Eurozone member states would most probably keep the EURO currency? First and foremost, one can say that Germany has taken most advantages out of the currency system (Will Germany kill the Euro?) and should not see any direct problems for its own economy when it sticks to the Euro.
Even if there are discussions about the possibility of Germany getting rid of the Euro, the German state might miss what it can enjoy today:
In a blogpost on seekingalpha.com, Mr. Cullen Roche, founder and CEO of an investment partnership, polemically points out in which respect Germany has already benefitted from the Eurozone:
“They have their lowest unemployment rate in 18 years, a booming economy, zero inflation, a monopoly on the export market in Europe and total control over the ECB.”
But what about the other Euro nations? It can be pointed out that at least France’s strength might come second after Germany. And after France? Which Eurozone member can be seen strong enough to stay in the group?One could stress the fact that the currency zone has established intense interdependencies between the member states. And for this reason, no country wants to abandon the Euro so easily as well.
One might have the uneasy feeling that it is too late to squeeze certain nations out of the Eurozone.
Even more, other economies would like to join the Eurozone as well. Perhaps, a compromise could be to help the PIIGS to recover fast and then kick them out so that these economies cannot trouble the Euro anymore. Obviously, there is no recipe for it. Either way, not all current member states can be satisfied at the same time.