Will the Euro zone survive?

With the 10th anniversary of the euro in 2012, the European currency is fighting for its very survival.

The European Union is now bitterly divided over how to preserve the currency with the majority opting for the building of a closer fiscal union to preserve the euro. This has resulted in Britain standing on one side against this move and Germany and France on the other. However the continental European alliance has decided to move ahead with a separate treaty without the UK.

Twenty three of the 27 EU leaders agreed on implementing tighter integration at a meeting in early December which would result in stricter budget rules for the single currency area. However Britain strongly opposed any changes which would affect the current EU Lisbon treaty.

There is however very real concerns that the situation is not containable and many now believe that individual countries’ central banks have already contingency plans in place to revert to their pre-euro currencies if the worst comes to the worst.

Another worry is that a number of countries may be asked to leave the currency zone, such as Greece and Ireland. Both required bailouts that certainly helped push the crisis along and both have come under immense pressure during the later stages of 2011 to reform their government spending.

As an honest broker I believe that Ireland has done its bit but, and it’s a big but, I don’t think we can afford this bailout any longer which brings us down the road of, yes, default! And with default brings the unknown. Devaluation probably which will wipe away the value of a huge amount of peoples savings. And then who do we tie ourselves to because as Ireland PLC we are too small a nation to float a separate currency.

There is huge speculation in international circles that The Irish Central Bank is printing punts (pre-euro currency in Ireland).This has been strenuously denied but speculation only adds fuel to the fire.

However one overhang on this whole Euro crisis is Italy. The countries debt poses the biggest threat with sovereign bond yields at dangerously high levels. Simply put, Greece or Ireland could not undo the euro zone; Italy can!

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