# Is the euro in danger? **URL:** \ **Category:** Great Debates\ **Created:** [May 6, 2012, 7:44pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094 "2012-05-06T19:44:31Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 6, 2012, 7:44pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/1 "2012-05-06T19:44:31Z")
Spinoff from [this](http://boards.straightdope.com/sdmb/showthread.php?t=610492) Elections forum thread on the French presidential election, which Socialist Hollande just won, which [Reuters](http://www.reuters.com/article/2012/05/06/us-france-election-projections-idUSBRE8450AR20120506) calls “a swing to the left at the heart of Europe that could start a pushback against German-led austerity.” To which **Airman Doors USAF** [responded:](http://boards.straightdope.com/sdmb/showpost.php?p=15038049&postcount=33) > [@](#): > > Maybe not now, but when the “pushback against German-led austerity” causes the collapse of the Euro, there will be more than enough depression and rage to go around. > > Why someone would think that an election with the potential to send the Euro crisis over the abyss is a good thing is beyond me. But hey, it’ll work for me since the US Dollar will benefit from the collapse (should it happen). Will it happen? Is the euro so fragile that it can’t survive a revolt against austerity measures? I don’t see how. Isn’t Europe what ecnomists call an [Optimum Currency Area](http://en.wikipedia.org/wiki/Optimum_currency_area)? And hasn’t everybody learned the advantages of having money you can spend anywhere in it? ---
**Author:** ![nudgenudge](https://avatars.discourse-cdn.com/v4/letter/n/9f8e36/32.png) [@nudgenudge](https://boards.straightdope.com/u/nudgenudge)\ **Post date:** [May 6, 2012, 8:07pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/2 "2012-05-06T20:07:57Z")
As I understand it, economists differ over what constitutes an optimal currency area, but I think they might agree that the eurozone isn’t it. The hassle of changing currencies has lessened, to be sure, but then it would have decreased anyway, due to technological advances. A citizen of a non-Euro country can get money from an euro-ATM without any problem, at a competitive exchange rate. No doubt the trade zone that is the EU is, to some extent, to thank for that. But the point is, it doesn’t require a common currency. It applies just as well to British citizens visiting Switzerland - that is, non-Euro users visiting a country that is not in the EU. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [May 6, 2012, 9:29pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/3 "2012-05-06T21:29:36Z")
I do see a euro collapse-but it actually will have benefits: -states like Spain, Greece, etc. can now devalue their currencies, and become competitive again -Germany can revert to its own currency, which will become stronger-that will cramp its exports a bit, but more importantly, reduce the cost of its imports-which will mitigate inflation. A noble experiment, but doomed from the start. Is George Soros shorting the euro? ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [May 6, 2012, 9:34pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/4 "2012-05-06T21:34:17Z")
Introduction of Euro was a huge blow against economic sovereignty of member countries, especially small ones. When the economic times are good, that can be ignored. When recession hits, and you cannot make independent economic decisions, the reality hits. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 6, 2012, 9:40pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/5 "2012-05-06T21:40:45Z")
> [@ralph124c](#): > > Is George Soros shorting the euro? [Quite the reverse.](http://www.thedailybeast.com/newsweek/2012/01/22/george-soros-on-the-coming-u-s-class-war.html) > [@](#): > > Soros doesn’t make small bets on anything. Beyond the markets, he has plowed billions of dollars of his own money into promoting political freedom in Eastern Europe and other causes. He bet against the Bush White House, becoming a hate magnet for the right that persists to this day. So, as Soros and the world’s movers once again converge on Davos, Switzerland, for the World Economic Forum this week, what is one of the world’s highest-stakes economic gamblers betting on now? > > He’s not. For the first time in his 60-year career, Soros, now 81, admits he is not sure what to do. “It’s very hard to know how you can be right, given the damage that was done during the boom years,” Soros says. He won’t discuss his portfolio, lest anyone think he’s talking things down to make a buck. But people who know him well say he advocates making long-term stock picks with solid companies, avoiding gold—“the ultimate bubble”—and, mainly, holding cash. > > He’s not even doing the one thing that you would expect from a man who knows a crippled currency when he sees one: shorting the euro, and perhaps even the U.S. dollar, to hell. Quite the reverse. He backs the beleaguered euro, publicly urging European leaders to do whatever it takes to ensure its survival. “The euro must survive because the alternative—a breakup—would cause a meltdown that Europe, the world, can’t afford.” He has bought about $2 billion in European bonds, mainly Italian, from MF Global Holdings Ltd., the securities firm run by former Goldman Sachs head Jon Corzine that filed for bankruptcy protection last October. Of course, that story is from January, I don’t know what he’s doing now. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [May 6, 2012, 9:42pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/6 "2012-05-06T21:42:13Z")
> [@BrainGlutton](#): > > Isn’t Europe what ecnomists call an [Optimum Currency Area](http://en.wikipedia.org/wiki/Optimum_currency_area)? If it ever was, it isn’t anymore. ---
**Author:** ![Nobody](https://avatars.discourse-cdn.com/v4/letter/n/94ad74/32.png) [@Nobody](https://boards.straightdope.com/u/Nobody)\ **Post date:** [May 6, 2012, 9:51pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/7 "2012-05-06T21:51:56Z")
If France and other countries start pushing back against austerity, seeing as how countries defaulting on their loans would bring much worse problems on all of the Eurozone (at least) than it currently has, doesn’t that give those countries a lot of leverage to negotiate with Germany and the banks? “If you don’t start backing off and being more flexible then we’re going down and we’re going to take you with us!” ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [May 6, 2012, 11:15pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/8 "2012-05-06T23:15:39Z")
I’d rate the collapse of the Euro at 50/50. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 6, 2012, 11:58pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/9 "2012-05-06T23:58:56Z")
If the euro (which is spelled with a lower-case “e,” BTW) does collapse, how does that affect the global economy? (That is to say, of course, how does it affect America?) ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [May 7, 2012, 12:03am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/10 "2012-05-07T00:03:56Z")
> [@BrainGlutton](#): > > If the euro (which is spelled with a lower-case “e,” BTW) does collapse, how does that affect the global economy? (That is to say, of course, how does it affect America?) Probably a non-event, except for the banks that hold bonds for vaious euro-nations.]s ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 7, 2012, 12:08am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/11 "2012-05-07T00:08:23Z")
> [@samclem](#): > > Probably a non-event, except for the banks that hold bonds for vaious euro-nations.]s That’s far too big an “except for” to add up to a non-event! American banks don’t have **enough** trouble right now?! ---
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [May 7, 2012, 12:23am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/12 "2012-05-07T00:23:39Z")
> [@samclem](#): > > I’d rate the collapse of the Euro at 50/50. I would rate it as higher than that but still not certain. The factual actual is that the Euro is in tremendous imminent danger as are the economies and stability of much of Western Europe as a whole. Most of aren’t used to thinking about Europe as a hotbed of political, social, and economic instability because it hasn’t been that way during our lifetimes (post WWII) but it has been historically just as volatile as the Middle East is today and could easily revert back to that given just a few additional negative circumstances. The thing that some people realize is that this isn’t just a choice that people can make. SOMETHING very big will happen soon to the Eurozone economy and probably within the next few months to a year. The current situation is unsustainable. Austerity measures aren’t meant just to be a means of punishment for the countries that have to undergo them. They are to buy time and to help correct systemic issues within those countries. All of the major world financial markets are tied together as a very automated system. Given the right set of triggers, the entire Eurozone banking system could collapse within in a few hours time and there isn’t anything anyone could do about it. The Euro was a bad idea to begin with and I hope that it does get dissolved with the smallest amount of disruption as possible to the European countries like Germany and France that can support themselves but especially to the world economy as a whole. The secondary effects would still be felt in the U.S. because of integrated financial markets. The U.S. might merely get thrown into another recession while the Eurozone would be dealing with a true and devastating depression. ---
**Author:** ![asterion](https://avatars.discourse-cdn.com/v4/letter/a/4da419/32.png) [@asterion](https://boards.straightdope.com/u/asterion)\ **Post date:** [May 7, 2012, 2:16am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/13 "2012-05-07T02:16:14Z")
> [@nudgenudge](#): > > As I understand it, economists differ over what constitutes an optimal currency area, but I think they might agree that the eurozone isn’t it. > The hassle of changing currencies has lessened, to be sure, but then it would have decreased anyway, due to technological advances. A citizen of a non-Euro country can get money from an euro-ATM without any problem, at a competitive exchange rate. No doubt the trade zone that is the EU is, to some extent, to thank for that. But the point is, it doesn’t require a common currency. It applies just as well to British citizens visiting Switzerland - that is, non-Euro users visiting a country that is not in the EU. The last time I was in the Eurozone was pre-euro, and the only hassle I remember when it came to money was that you didn’t want to get stuck with too much cash because you probably wouldn’t get as good an exchange rate than you would pulling from dollars to the needed currency via ATM. The other problem was that you still needed a lot of cash on hand instead of being able to use plastic of one form or another for almost everything. Combine that with the ATM often giving out too big a bill to be useful–I pulled $100 in Vienna, for instance, and got about 1300 schillings, mainly being a 1000 schilling bill and three 100 schilling bills. It was like having three tens and a hundred. Impossible to find a place to break it. I think they have a chance to save the euro, but they’ll have to make some real big changes to do so. I can’t really say to any specifics, just a feeling that there would have to be actual political integration on a much deeper scale than what currently happens in Brussels. Right now, it feels to me like the difference between the Articles of Confederation and the Constitution. ---
**Author:** ![Hellestal](https://avatars.discourse-cdn.com/v4/letter/h/3ab097/32.png) [@Hellestal](https://boards.straightdope.com/u/Hellestal)\ **Post date:** [May 7, 2012, 2:46am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/14 "2012-05-07T02:46:53Z")
> [@BrainGlutton](#): > > Is the euro in danger? Yes. We’ve had a lot of threads on this topic. Quite a few. Feel free to do a search sometime. > [@BrainGlutton](#): > > Is the euro so fragile that it can’t survive a revolt against austerity measures? I don’t see how. This isn’t about resisting a “revolt”. You can’t force people to keep their promises. This is especially true when you are deliberately setting up a system that makes it harder for them to keep their promises. I have nothing much against austerity, in broad principle. A lot of countries in Europe need to undergo stringent economic reform in order to be more efficient. The problem is that despite the long-term benefits of economic reforms, including some of the current austerity measures, _Europe is facing a cyclical problem_. Austerity is contractionary. It makes cyclical problems worse if it’s not offset in some other fashion, like a more sensible monetary policy. It is literally impossible for austerity to work when the afflicted countries are _already_ suffering a sharp drop in NGDP with no chance of external devaluation. Austerity just makes cyclical problems worse. Austerity is doomed to failure if there isn’t some other measure to increase the nominal income of the afflicted countries. > [@BrainGlutton](#): > > Isn’t Europe what ecnomists call an [Optimum Currency Area](http://en.wikipedia.org/wiki/Optimum_currency_area)? Fuck the hell no. A few selective euro-boosters said the eurozone would be more optimal than individual countries. Some people also said the Titanic wouldn’t sink. Our opinions on these sorts of over-confident statements should, if we are rational, update when we begin to notice the ship taking on water. > [@samclem](#): > > I’d rate the collapse of the Euro at 50/50. I won’t argue with that, but I’d give four-to-one odds that the eurozone won’t exist in its current form within two years even if it doesn’t collapse entirely. A country could, possibly, be ejected without the whole system coming apart. Possibly. There’s also a remote possibility that Germany eventually sees reason and accepts that the eurozone needs higher NGDP growth, which means they need [to eat a higher inflation rate](http://www.economist.com/node/21554188). Chances of them accepting this are much higher if the world starts to crumble around them and they see no other choice for their _own_ banks. Things could be weird, even without a collapse. The present path can’t continue, and they’ll wise up to that, in one way or another. Contractionary policy like austerity is exactly the wrong medicine for their current problems, if it’s not balanced by higher NGDP from more sensible money from the ECB. > [@samclem](#): > > Probably a non-event, except for the banks that hold bonds for vaious euro-nations.]s I’d like this to be correct, but we’ve had a recent lesson in finance on how systems that seem to be separate can become inextricably connected in subtle and dangerous ways. Even if US banks have hedged their primary exposure, I’m not so confident that they’re similarly immune to secondary and tertiary effects. I would say, though, that the Fed response is nearly guaranteed to be better than the ECB response, which is a big advantage in our favor. ---
**Author:** ![BrainGlutton](https://avatars.discourse-cdn.com/v4/letter/b/82dd89/32.png) [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)\ **Post date:** [May 7, 2012, 3:15am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/15 "2012-05-07T03:15:20Z")
> [@Hellestal](#): > > Austerity is doomed to failure if there isn’t some other measure to increase the nominal income of the afflicted countries. Such as? ---
**Author:** ![Capt.Ridley\_s\_Shooting\_Party](https://avatars.discourse-cdn.com/v4/letter/c/cc9497/32.png) [@Capt.Ridley\_s\_Shooting\_Party](https://boards.straightdope.com/u/Capt.Ridley_s_Shooting_Party)\ **Post date:** [May 7, 2012, 9:27am UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/16 "2012-05-07T09:27:31Z")
The Euro is toast unless there’s much deeper integration amongst the constituent nations which absolutely nobody wants. The only question is how best to dismantle it without setting off another depression or war; the Italians assassinate their politicians almost willy-nilly even in the best of times, and the Greeks have just elected a clutch of Neo Nazis and Communists into national government. ---
**Author:** ![Martin\_Hyde](https://avatars.discourse-cdn.com/v4/letter/m/47e85d/32.png) [@Martin\_Hyde](https://boards.straightdope.com/u/Martin_Hyde)\ **Post date:** [May 7, 2012, 12:03pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/17 "2012-05-07T12:03:02Z")
I think the euro as a whole is definitely at risk. There are two things I don’t understand about the issue in Greece, though: 1. Why does Greece seem to get to vote on austerity measures 25 times a year? What is the constitutional reason Greece has had so many votes on austerity? A huge part of the instability now is because no vote in Greece is final for any reasonable period of time. At least in the United States if we vote in a new slate of politicians then we’re stuck with that decision for two years at minimum (sometimes four, sometimes six.) I understand Greece is a type of parliamentary democracy but how in the hell is it that their system results in new votes on this stuff so many times in such a short period of time? 2. At this point, I think the uncertainty and instability being caused by Greece’s presence in the euro is potentially worse than the actual fiscal effects of Greece rejecting austerity. Why not just eject Greece from the euro currency zone? This would allow Greece to hyperinflate its currency and pay off all of its creditors. Any bailouts from the eurozone countries would be for eurozone banks that lost money due to this. This would be bad in the short term for everyone, but I actually think it would allow both the eurozone and Greece to get things back on the right track a lot faster than the current situation. I don’t believe hyperinflation style bankruptcy is a panacea (many people point to places in South America where it has worked very well), because for large established economies like the United States, United Kingdom, France etc I think the results would be too negative. For a small country like Greece that has never **truly** been first world on the same level as most of the eurozone and other major western countries I think hyperinflation is something that Greece politicians need to be capable of using as an emergency tool. ---
**Author:** ![ralph124c](https://avatars.discourse-cdn.com/v4/letter/r/8797f3/32.png) [@ralph124c](https://boards.straightdope.com/u/ralph124c)\ **Post date:** [May 7, 2012, 12:54pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/18 "2012-05-07T12:54:04Z")
Simple. Re-introduce the various national currencies, and announce that the old, euro denominated debts will be paid according to a new exchange rate. End of story. Why keep the charade going? Greece can NEVER pay off its debts-even if every Greek paid his taxes for 100 years. Write off the debt and start over. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 7, 2012, 1:24pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/19 "2012-05-07T13:24:41Z")
> [@Martin\_Hyde](#): > > 1. Why does Greece seem to get to vote on austerity measures 25 times a year? What is the constitutional reason Greece has had so many votes on austerity? A huge part of the instability now is because no vote in Greece is final for any reasonable period of time. At least in the United States if we vote in a new slate of politicians then we’re stuck with that decision for two years at minimum (sometimes four, sometimes six.) I understand Greece is a type of parliamentary democracy but how in the hell is it that their system results in new votes on this stuff so many times in such a short period of time? I’m certainly open to correction, but my understanding has been that the financial relief for Greece has come in a series of stages or “tranches”, and each tranche has conditions placed on it by the central bank (essentially France and Germany for this discussion). Greece in turn has to accept those conditions on each tranche, which has to be done in Parliament, by a vote. Why the relief is structured this way, I don’t know - I think because it responds to changing conditions as they go along. ---
**Author:** ![Northern\_Piper](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/northern_piper/32/5304_2.png) [@Northern\_Piper](https://boards.straightdope.com/u/Northern_Piper)\ **Post date:** [May 7, 2012, 1:34pm UTC](https://boards.straightdope.com/t/is-the-euro-in-danger/621094/20 "2012-05-07T13:34:32Z")
Forgot to add - that’s different from the recent elections to Parliament, which elected new members. Normally that only happens every few years, just as in the US, but if the government falls on a confidence vote (e.g. - if the Parliament rejects the terms of a tranche and the government resigns), it can trigger new elections. [Next page](https://boards.straightdope.com/t/is-the-euro-in-danger/621094.md?page=2)