Friday, 2 December 2011

Will Germany drop the Euro?

Giuseppe De Santis brought to our attention an article published in Italy that says that the Northern League is asking for clarification regarding rumours that Germany has contracted the services of a non disclosed printing shop in Switzerland to print... Deutsch Marks.

Do you remember that just a few days ago German Chancellor Angela Merkel speaking during a meeting of the Bundestag said that the alternative to the Euro was war in Europe?

What has changed? What is behind the rumours? Are these merely rumours? The Italian newspaper says that the news has not been officially confirmed and I would be very much surprised if the news had been confirmed.

There are fears that in the present financial environment, if Germany were to re-adopt the Deutsch Mark as its national currency, such a move would completely destabilize European economies.

When there is no clarification and there is lack of trust, rumours are bound to spread at even faster speed and this is something that speculators love because they are out to make a killing.

It is natural for the Northern League to be extremely concerned about any currency changes, especially when the office of Prime Minister Silvio Berlusconi came to an end as part of an arrangement to implement austerity measures requested by Germany as a pre-condition to support Italy that is in a dire financial situation.

The Northern League was a political ally of Silvio Berlusconi. Attachment to the Euro meant that Italy without the Lira could not use devaluation as a way to try and get out of the crisis and had to surrender to conditions imposed by Germany.

If the Euro were to come an end, all financial arrangements made with countries like Ireland, Portugal, Italy, Greece and others would have to be re-calculated. If the Euro disappeared, which currency would be used to recalculate financial agreements?

I reckon our George Osborne should be very much interested in having clarification about this and other issues. As a country, Britain has committed billions of Pounds to support the Euro.

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