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Thought Experiment: Busting the Euro

by: Paul Kedrosky October 07, 2008 | about stocks: ERO    
Paul Kedrosky

Paul Kedrosky

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Lots of chatter in various circles, including my weekend comments, that we could see the banking crisis in the U.S. and Europe mutate into a currency crisis in Europe. It is not an idle question to wonder what it might take to break -- or maintain -- the Euro if stresses continue given massive bank bailouts, comprehensive deposit supports, etc.

Here is Wolfgang Munchau in the FT:

For Europe, this is more than just a banking crisis. Unlike in the US, it could develop into a monetary regime crisis. A systemic banking crisis is one of those few conceivable shocks with the potential to destroy Europe's monetary union. The enthusiasm for creating a single currency was unfortunately never matched by an equal enthusiasm to provide the correspondingly effective institutions to handle financial crises. Most of the time, it does not matter. But it matters now. For that reason alone, the case for a European rescue plan is overwhelming.

More here from John Mauldin's latest.

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This article has 1 comment:

  •  
    Oct 08 02:09 PM
    Where would we be without strong Allies like France??.
    Do they hear German boots on the border again???
    Send them not a nickel less than a Billion $ for each French soldier by our side in Iraq.
    Reply
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