The euro disintegration seems imminent and more a question of ‘when’ then ‘if’. Reading the international finance press, the markets and political responses so far, a breakup is likely, possibly even before Christmas, but really not later than early next year.
The most likely scenario will be:
• a German exit to a new currency (DM off course)
• other strong countries (Netherlands, Finland, Luxembourg and Austria) joining, as soon as
politics allow, pegging their new currencies to the DM
• weak countries will remain in the euro zone and reunite under French leadership; this group is
likely to follow an Argentine style devaluation route
This
will have big impacts on business and trade volumes
1. currency appreciation and stagflation in the North
2. devaluation of the euro (if it still exists), hyper inflation and unrest in
the South
3. uncertainty around euro-denominated contracts, whereby pain will fall to
creditors
Clearly this crisis is already on your company’s radar as it may even impact the continuity of your business. A good response will likely become a big project and require adequate resourcing rather sooner than later.
When above scenario starts unfolding, please feel free to contact us to consult, join or help start up your euro-risk-management project.