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John Taylor of the hedge fund FX concepts is bearish on the euro, to say the least…
It will be a cold and hungry winter in Athens. The local politicians must be fortified in their euro-ness by threats from Germany, France and Brussels, and as the pressures increase the commands will too. The strategy of the politicians is to kick the can, don’t let anyone give up, and pray that growth will reappear. If things don’t work out, the politicians know that they will lose their jobs and their reputations. As none of their strategies foster growth and a recession is coming, the debts will grow in relation to the underlying economies, so their prayers will go unanswered. Every year that this situation goes on the quality of life will deteriorate for the average citizen, but it also means that the economic reality after the euro will be meaner.
This picture of stagnation and decade-long deterioration in Europe is the optimistic outlook as it assumes that everything holds together. Corporations and banks would still be employing people and retirement plans would survive. Even if we assume that the complete implosion of Greece is insignificant for the euro-system, what is the Troika’s plan if Italy defaults on its bonds? Or, even if Ireland and Portugal quickly follow Greece down the rat hole? All the banks will collapse and Europe will follow, but there is no plan. Without new ideas for the restructuring of Europe, either a real change in the way society is organised or a retreat from euro-ideals and a reversion back to unstable individual states, the process will be chaotic. The euro’s failure could be months away or maybe years, but it is coming, and the authorities had better wake up. The three blind mice lost their tails, but Europe wil lose more.