Is the euro a 'burning building with no exits?'
When recently interviewed, British Foreign Minister, William Hague described the euro as "a burning building with no exits."
The quote makes for a striking mental image - and it should make us think. Problems within the Eurozone are well documented, but in essence countries, which for political reasons manipulated their figures to meet accession criteria, are now being burned badly, and self-preservation dictates an exit will be forcefully created. While the current structure does not allow for this, a tipping point is coming which politicians will be powerless to prevent, this being caused by the relentless need to refinance debt factored against the German reluctance to sanction any further fiscal transfers.
While it is safe to assume that at this point Greece will have no choice but to leave the euro, such an event creates more questions than answers. However, it is logical to assume that once a way is found for Greece to exit, there will be a political exercise applied by the rest of the PIIGS (countries which are going through a recession within the Eurozone: Portugal, Italy, Ireland, Greece, Spain) to see if it really is worth staying in the monetary union, or if the best strategy is to selectively default on debt then exit. This would create the need to competitively devalue, have export driven economic growth and take the credit electorally for "listening to the people."
Certainly, some- if not all - will follow suit. Some will jump, others will be pushed....
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