Why the British may be more careful falling in love with the euro.
Sir Wolfgang Münchau in “Why the British may decide to love the euro” November 17, makes some curious assumptions, first and foremost placing an equal sign between the dollar and the euro. The dollar is the currency of an already established country, with already established rules in how to handle the printing machines when in a crisis while Europe, whether we like it or not, is still a work in progress with little design on how to go about and print out Euros in order to fund European bail-outs.
Of course, a more accepted and wider used currency should in normal circumstances “offer more protection from speculative attack” than “a free floating offshore currency unit” (what a belittling way of referring to the historic pound sterling) but the fact is that current circumstances have very little to do with speculation and much to do with harsh realities.
Since Münchau in this context also brings up Iceland perhaps he could explain to us how much better off Iceland would have been had they used Euros instead of their Krona. As I see it Iceland would just have been able to run up quite a bit more leveraged debt, before all hell broke lose. Is that good?
At this junction one Pound Sterling gives a claim on a weakened but defined England while one Euro places a not completely defined claim on a not completely political Germany-and-Italy averaged Europe; and which of them might look stronger to the markets down the line, is yet to be seen.
Of course, a more accepted and wider used currency should in normal circumstances “offer more protection from speculative attack” than “a free floating offshore currency unit” (what a belittling way of referring to the historic pound sterling) but the fact is that current circumstances have very little to do with speculation and much to do with harsh realities.
Since Münchau in this context also brings up Iceland perhaps he could explain to us how much better off Iceland would have been had they used Euros instead of their Krona. As I see it Iceland would just have been able to run up quite a bit more leveraged debt, before all hell broke lose. Is that good?
At this junction one Pound Sterling gives a claim on a weakened but defined England while one Euro places a not completely defined claim on a not completely political Germany-and-Italy averaged Europe; and which of them might look stronger to the markets down the line, is yet to be seen.
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