• The post you are reporting:
   
  David is right.
  
  The problems of how this will be resolved are massive.
  
  If a currency looks like decoupling from the Euro to devalue then there will certainly be capital flight including a likely run on the banks. If any country also defaults on debt then lenders in Germany and elsewhere will lose dosh. These lenders who could lose out include banks, insurance companies, investment companies, pension companies and governments.
  
  Decoupling does not necessarily mean default - indeed it may make countries like Greece be more able to afford to service their debt also default does not necessarily mean all loans will be defaulted on either. This is why we need the decoupling, devaluations and defaults to be carefully managed.
  
  Decoupling from the Euro, difficult as it certainly is, happens to just be the least bad option and the one that offers an end to the crisis (well, the start of the end anyway).
  
  Germany not only have their heavily indebted banks to worry about, but by weaker countries leaving the Euro, the value of the Euro would improve making their exports less competitive and that would be very painful for their manufacturing that has coined it at the expense of the Greeks and Spanish for quite a while.
  
  To throw one more complication into this - Germany have an election in 2013 and may do anything to stop Greek leaving the Euro before then but those measure that have a chance of preventing that will also be electorally unpopular as Germany would be bankrolling all the weak spendthrift Eurozone countries.
  
  It is a very complex picture.

Report Post

Your Name

Reason