Ralf HallerRalf Haller May 21, 2010

A week of chaos with the EURO – 6 lessons learned

This week’s EURO mess showed a few things that one might have suspected beforehand but only became evident when the crisis hit, and there are good chances now to fix issues finally.

  • German – French friendship seems more for political show than something Europe could rely on in a crisis.
  • In contrast, the Swiss showed where their real interests lie and supported the Euro heavily with their national bank which already holds two thirds of its reserves in Euros.
  • Deutsche Bank and others are actually more interested in making tons of money in such a situation than stabilizing the markets. Total trading transparency and control are inevitable in the near future meaning NOW to show who follows what interests.
  • Even though the UK has just had a change of government it also became clear that Europe is somewhat a club without them. If one looks at the fall in the British pound in the last few years the Euro is a safe currency in comparison. I think the UK needs to decide if they want to really become part of a European system or stay isolated on their island somewhere in no man’s land between Europe and the US. It is their call.
  • Without strict fiscal control of Euro countries and punishments when needed this will not work; it looks like Germany is taking on the role of watchdog, which might be a good thing for all in the end.
  • Countries can become bankrupt and the financial institutions who lend them money can’t hope anymore so that the taxpayers pay for eventual losses; the same will be true for big banks.
  • update: This here is a good contribution in the Swiss newspaper Tagesanzeiger. The author suggests that the EURO countries include into their constitutions a maximum debt threshold. That way – assuming the countries respect their constitutions – ¬†each country can separate the discussion from politics since it becomes a law. Germany followed last year Switzerland doing exactly that.