spotfxtrader

As reported in the Telegraph by Emma Rowley.

http://www.telegraph.co.uk/finance/currency/8427703/One-in-seven-chance-that-nations-will-abandon-euro.html

‘One in seven’ chance that nations will abandon euro

The risk is roughly one in seven that Europe’s ongoing debt crisis will push member nations to abandon the shared currency, raising the spectre of the “effective end of the euro area,” the Economist Intelligence Unit has warned.

Attempts to restore investors’ confidence in debt-laden nations’ ability to honour their commitments could see the weaker eurozone members grow ever wearier of the demands placed on them, according to a new report from the research body.

Meanwhile, those countries whose finances are in better shape could lose patience with propping up other member nations, in this worse case or “ultimate risk” scenario.

The pressure on politicians from voters at home to leave the shared currency could then become “irresistible”, resulting in either stragglers like Portugal or Ireland or a robust economy such as Germany deciding to leave, before other members follow suit.

“This scenario posits that sooner or later, the cement that has held European countries together for decades cracks and the progression towards ever-closer union comes to a spectacular halt,” said researchers, who gave it a likelihood of 15pc.

The report’s central scenario – put at a 50pc probability – is that the eurozone will muddle through the crisis, with the most indebted countries accepting the harsh reforms needed to cut their deficits and stronger members reluctantly offering enough support to contain the crisis.

However even this relatively benign resolution of the crisis expects some countries to default on their debt, with Greece seen as the most likely. The least probable scenario, put at a 10pc likelihood, is that the eurozone will undergo a resurgence as countries manage to rein in their public finances, researchers thought.

The European Central Bank is on Thursday expected to raise interest rates to fight inflation across the eurozone, but there are fears it will make conditions even harder for the struggling periphery.

There was no mention of the probabilty that the politicians responsible for this will face any criminal charges for their unconstitutional and anti-democratic actions in attempting the euro project in the first place. OK, I added that last bit. But these people are wholly culpable for the extensive misery the whole euro project has caused to millions of people across the continent.

But raising interest rates in euro land is the correct thing to do to prevent hyperinflation and maintain sound money. The peripheral countries will be forced to leave… the 15% probability assigned to this outcome is wishful thinking.

If (when) rates rise, the Euro (i.e the Deutschmark in disguise) will rapidly strengthen.