How real is the possibility of Germany leaving the EU?

 

This year has shown that the further perspectives of the EU and its currency are not that favorable. Some experts even say that their existence may go out on a limb. According to them, there are plenty of significant reasons for numerous countries of the Euro zone to go back to their own national currencies. And they well may do it in the future.

What is Germany dissatisfied with?

Masterforex-V Academy experts have defined the following issues:

·         The only thing known for a certainty is that most Germans are not satisfied with the common European currency.

·         The Cologne-based analytic center called YoGov-Institut has recently conducted a corresponding survey. The results show that about 49% of the respondents want the D-Mark back while 41% oppose their opinion.

·         No wonder that the results look like that because the Euro currency is less reliable than the old D-Mark, which has had a significant impact on the income and the quality of life of most Germans.

·         Having a relatively powerful economy Germany has to support its weaker EU counterparts.

No wonder that 77% of respondents say their well-being declined after the introduction of Euro. In addition to that about 51% of the respondents are simply not satisfied with the currency, 67% question its stability while 57% expect a significant increase in the inflation rate.

The absence of firm guidelines and rules is the way to crisis?

Masterforex-V Academy analysts share the same opinion (especially after the recent article on Soros) that during the troublous times any international union with common currency must have an executive office that would monitor and control the compliance with the union’s financial policies.

These days the financial sector of the European Union keeps facing some difficulties, which cannot be solved at the current level of the Euro Commission, which may be another reason why numerous countries of the Euro zone what to abandon Euro.

For example, according to the Slovakian speaker Richard Sulek, Slovakia may decide to quit the Euro zone if the current debt crisis keeps expanding. Moreover, he pays special attention to the absence of some distinct system of rules for the Euro Commission to follow, which sometimes leads to its irresponsible behavior.

Moreover, The Slovakian Finance Minister Ivan Milos assumes that Europe experiences more problems than it may seem at first sight, According to him, they appeared as the result of making a range of wrong decisions, including financial aid to Greece and Ireland. He says that simple debt restructuring would have been much more effective in this case.

Forecast: what is the impact of some countries’ weakness on the EU?

Experts of Masterforex-V Academy say that many of those countries currently experiencing budget-deficit problems could have avoided them if they had had an opportunity to devalue their national currencies (but they didn’t have ones). It seems that currency devaluation well may turn out to be the only way for all the crisis-ridden and weak economies to avoid default. For example, Greece and Ireland could have avoided all the problems connected with their budget deficit if they had had their own national currencies to devalue. But instead they have to introduce unpopular austerity measures connected with budgetary reduction to cover the gap.

On the other hand, the European Research Institute estimates the chances of Euro-zone disintegration as 1/5.

Despite the obvious problems connected with budgetary deficit, ineffective monetary policy and considerable macroeconomic imbalance (when the strong economies lose by supporting the Euro currency rate and the weak ones cannot sustain the necessary pace of economic growth) no Euro-zone member has ever seriously considered getting back to the old national currency. All the announcements sound like “shy” threats or hypotheses.

Euro currency rate

At the moment of writing the article EURUSD was moving around the lower border of the 1.3-1.34 wide range. Yesterday the currency pair failed to settle above 1.32. If the price manages to settle above it, the next target area will be 1.34. If the price gets below 1.3, the next support level is expected around 1.2850. Experts from the Department of Market Sentiment Analysis, Masterforex-V Academy, do not recommend opening any mid-term positions for EURUSD before the price comes out of the range.

What does Euro mean for Germany?

Vladislav Mitiashin, financial analyst for Fresh Forex, says that Euro provides Germany with significant export advantages and position of the EU’s political and economic leader. No wonder that it does its best to stabilize the situation in the Euro zone. On the one hand, Germany is some kind of locomotive, which uses 40% of its power to “haul” the rest of the Euro zone (maybe except France). Consequently, helping the peripheral countries means putting their problems on the shoulders of German taxpayers. Wh would like this? If the Euro zone is disintegrated (all the countries return to their old national currencies) Germany will feel relief.

Is it only Germany that can fell relief by abandoning Euro? If the risky Euro zone members with debt problems abandon the common currency it may also help to save their national economies. For examples, Greece and Ireland cannot make use of their tax and budget recourses to support their economies because of the difference in the economic conditions with Germany… Germany is for preserving Euro, but it has to help the problematic countries, which leads to growing political instability in the country: the deficit of the social funds is expanding while the unpopular measures are getting more necessary. Angela Merkel has become the target of attacks made by the opposition.

Vladislav Mitiashin sums up:

On the other hand the European currency system and the European Central Bank exist to preserve and strengthen the privileges of the political elite, where Germany takes the leading position and gets certain benefits from it. The Euro currency is not only a payment means but also an alternative to the US Dollar, to be more specific, a means of restraining its influence in the world. It is not accidentalthat numerous countries around the world, including China (which is a 3rd power opposing USD), have their currency reserves both in USD and EUR.

In order to find out whether it is beneficial for Germany to abandon Euro, both the sides of the coin should be considered.

Market Leader and Masterforex-V Academy offer you to share your opinion on the matter to make picture more objective. Please, answer the following question:

Would Germany benefit from abandoning the common European currency?

·         Yes, it would

·         No, it wouldn’t

·         Sooner or later the EU will disintegrate on the strength of both economic and political reasons.

 

 

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