Don’t let the Euro hit you in the butt on the way out

From American Thinker.Com

May 07, 2011

Don’t let the Euro hit you in the butt on the way out

Rick Moran

If you’re like me and have a dummy’s knowledge of high finance, you can still appreciate the irony, as well as the historical nature of what Greece might be about to do.

Athens is seriously considering abandoning the Euro and going back to it’s own currency:
Sources told SPIEGEL ONLINE that Schäuble intends to seek to prevent Greece from leaving the euro zone if at all possible. He will take with him to the meeting in Luxembourg an internal paper prepared by the experts at his ministry warning of the possible dire consequences if Athens were to drop the euro.”It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro,” the paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble’s staff have calculated that Greece’s national deficit would rise to 200 percent of gross domestic product after such a devaluation. “A debt restructuring would be inevitable,” his experts warn in the paper. In other words: Greece would go bankrupt.

It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. At the same time, it is questionable whether other members of the currency union would actually refuse to accept a unilateral exit from the euro zone by the government in Athens.

What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy.

Think of the other nations – Ireland, Portugal, Spain, among others – who are chafing under the Euro. Fleeing the common currency would destroy the European Union – or at least take away it’s major reason for existence.

Thankfully, there would be little impact on the US except in the prospect that Europeans would have less money to buy American goods. But it should be very interesting to see how 1) Greece will make the leap, and 2) how the other European powers can stop them.

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