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European countries making backup plans to print separate currencies?
Old 12-08-2011, 06:43 AM   #1
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European countries making backup plans to print separate currencies?

This WSJ article indicates some EU countries (inside and outside the Euro zone) are making preliminary studies of what they'd need to do to revert to previous currencies if the euro collapses.

There's nothing definitive here, just the kind of worst-case contingency planning that countries often do--and need to deny doing.

From the article:

Quote:
Some central banks in Europe have started weighing contingency plans to prepare for the possibility that countries leave the euro zone or the currency union breaks apart entirely, according to people familiar with the matter.
The first signs are surfacing that central banks are thinking about how to resuscitate currencies based on bank notes that haven't been printed since the first euros went into circulation in January 2002.

. . . .

J.P. Morgan Chase & Co. put out a report Wednesday that advised investors and companies to hedge against a collapse of the euro zone—though the bank said the likelihood of that happening was just 20%. It said many corporate clients were buying currency derivatives to place bets against the euro.
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Old 12-08-2011, 09:41 AM   #2
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They are in a similar position to us when the Bush Admin introduced TARP. A lot of citizens and a few economists said let the banks fail. That certainly would have put some discipline into the financial system. But the vast majority of economists said that it would also precipitate a disaster too horrible to contemplate. Same with the EU. Many EU countries would appear to be better of if they had the flexibilities offer by independent currencies. But those in the know say the path to that is too horrible to contemplate. Interesting days, months, and years ahead.
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Old 12-08-2011, 11:25 AM   #3
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...if the euro collapses.
Unless France and Germany (sorry-- Germany and France) get the power to set budgets and taxes for all the other clowns, 'if' is 'when' and 'when' is tomorrow.
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Old 12-08-2011, 11:26 AM   #4
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I was wondering whether Eurozone countries were preparing backup plans. Given that that eurozone countries had to print/mint Euros and build reserves over a period of years before the common currency was introduced, I wonder if some countries haven't secretly started printing/minting and building reserves of their old national currencies just in case.
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Old 12-08-2011, 08:33 PM   #5
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Originally Posted by FIREd View Post
I was wondering whether Eurozone countries were preparing backup plans. Given that that eurozone countries had to print/mint Euros and build reserves over a period of years before the common currency was introduced, I wonder if some countries haven't secretly started printing/minting and building reserves of their old national currencies just in case.
Given that this problem was widely debated at the time the Euro was adopted, it would be very surprising if there weren't plans for at least some Euro countries to revert to pre-Euro currencies. Of course, the more people believe it will happen and act on that belief the more likely it is that it will happen.

Personally, I believe we are past the point where Europe's disfunctional leadership has to accept that while European economic union has been a good thing, currency union without fiscal union (or at least strong fiscal controls) has been an abject faiure.
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Old 12-08-2011, 09:46 PM   #6
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Originally Posted by traineeinvestor View Post
Given that this problem was widely debated at the time the Euro was adopted, it would be very surprising if there weren't plans for at least some Euro countries to revert to pre-Euro currencies. Of course, the more people believe it will happen and act on that belief the more likely it is that it will happen.

Personally, I believe we are past the point where Europe's disfunctional leadership has to accept that while European economic union has been a good thing, currency union without fiscal union (or at least strong fiscal controls) has been an abject faiure.
Agree. Read the article tonight. Have been following. Feels similar to the U.S. financial crisis. There were warnings written in the WSJ for many months...before it happened. I bet Morgan Stanley "really thinks" there is more than a 20% chance of it happening. Wonder how to find out how much hedging against the euro is really going on.
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