Saturday, January 26, 2013

The Euro in Perspective

I'm commenting about the interview in Davos with the Blackstone Group's John Studzinki, by Reuter's Alex Smith (January 26, 2013) on future prospects of the Euro, which deserves clarity. See "Real Estate in Europe Ripe for Plucking".

Studzinki is correct in his assessment that Europe is calmer. Certainly, there is a greater sense of ease and patently absent is the rush from the madding notion that the Euro will collapse. However, the prospect of the Euro collapsing, of Germany and France being wiped into economic oblivion and of investors in the Euro having to take a bath, was never on the agenda. What is relevant, is whether the Euro will continue to exist in its current form or not.

Although some investors take comfort in the fact that governments are not caught in their regular fox hunt, seeking debt restructuring and assuring investors that the ECB has sufficient funds for a bail out (if the rabbit cannot be found), it's not over until it's over, and the likelihood of PIIGS vacating the Euro still remains high.

Is this a danger to the Euro currency or to European unity per se? No, it doesn't have to be that way, contrary to some opinion that makes its rounds in the coffee houses of some institutions located in the public service or to those who feel that their jobs, financial interests and vested future lies in the Euro, in its current state.

However, a Euro with PIIGS out of the way (although still very much part of the EU) will make for a stronger currency and a quicker resurgence of growth in Europe, which is currently sadly lacking.

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