The prospects for the euro just got bleaker, even though the mainstream financial press seems oblivious. Zero Hedge has an interesting analysis of Ireland's apparently unilateral decision to print 51 billion euro- around 25% of the Ireland's GDP- and give them to their banks to recapitalize them, in violation of spirit (if not law) of the EU treaties. If they do so without repercussion, then I don't doubt Italy, Greece, Spain and Portugal will soon follow suit in a vain attempt to save their own ailing banks and underfunded governments. Such (hyper)inflationary tactics will exacerbate the already high tensions the PIIGS have with the rest of the EU nations, especially Germany.
I've been wary of the prospects for the euro since the beginning, but the current crisis seems to be revealing the fiat folly faster than anyone could imagine. Massive printing of euros by the struggling PIIGS would no doubt bring chaos to the economies of the (somewhat) more responsible northern nations, and could catalyze calls by currently marginalized segments of the population for withdrawal from the common currency. Germany already has a sizable minority of euro dissidents, and without Germany the euro would collapse. The actions of Ireland, if repeated by the other struggling nations, would undoubtedly galvanize the thrifty Germans and lead undecided citizens to call for a return to the deutschemark.
Here are 2 snips from
the article-
"The
Irish Central Bank has crossed the Rubicon in European Union currency terms. They have printed up about 25% of their GDP in electronic credits, and stuffed those credits into their banks. These deposits, if you will, do not have new debt issued behind them."
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"While this has happened before in history, it has not happened in the Euro currency project officially before today. This act is going to move the monetary policy of the union, to the individual capitals. The capacity to print electronic credits, with out the creation of cash currency or debt, is a new wrinkle in the economic landscape."