Eurozone news: Euro currency enters perilous decade – serious threat to survival | City & Business | Finance
The news comes as the eurozone is experiencing unprecedented rises in interest rates, with Germany seeing a 29-year record 5.2 percent due to high energy and manufacturing costs, and supply chain issues all taking their toll. For the euro, this means printing more money to meet inflation demands, both devaluing the currency and increasing national and regional debt in the process.
series of magazines, the coin was initially a great success.
He said: “As it enters its third decade, the single currency has in a sense proved a resounding success. It is now the established currency for 19 countries, it has weathered a major financial crisis and it has made transactions across borders seamless for thousands of businesses and millions of consumers.”
However, with circumstances changing rapidly, he said: “And yet it is also about to enter its most dangerous decade. Why? Because inflation is much more threatening to monetary unions than deflation; because the money will print like crazy as everyone tightens the policy; and because debt is now skyrocketing at the core instead of the periphery.”
Writing in The Telegraph about a trend in the pattern, Mr Lynn said: “Many financial systems have worked successfully for two or three decades and then collapsed – and in reality the 1920s will be very dangerous for the euro.”
There is also the idea that other global currencies are exerting pressure on the euro, which is competing on an international scale.
The current norm in foreign exchange reserves falls on the US dollar.
The greenback has held the title of global currency for decades, but even the dollar is seeing a rapid and worrying global decline.
Due to the rise of the Chinese economy, several trading partners with Beijing have switched to the yuan as a means of payment.
Add to that the idea of the digital yuan, which is designed to make transactions even easier, and the euro and dollar suddenly become less attractive to traders and investors.
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A logical solution to the eurozone’s problems would be to move to a political union with a federal budget and a single market for government bonds.
Given the economic and social tensions facing France in the eurozone, it is no wonder that the French president has urged Germany to agree to deepen the eurozone by pushing for a common fiscal policy.
That is why some academics and financial experts think that the end of the euro is near.
Mr Lynn said: “In reality, 20 years is hardly a long time for a monetary system. Bretton Wood lasted from the end of World War II to the early 1970s. The gold standard in various forms for decades.”
He added: “The Latin Monetary Union faltered from the 1860s to the First World War. Just because the euro has been around for two decades now, we should not be complacently assuming that it will last forever. In fact, the 1920s will be the most dangerous decade yet.”
Clem Chambers, a writer for Forbes magazine, strongly disagrees that the euro is a doomed currency.
Writing in Forbes, Mr Chambers: “Don’t count on a collapse of the euro in a dissertation in your lifetime, unless you think a near-global extinction is imminent.”
He added: “It takes quite a historical textbook to break the euro. Despite what the dollar hegemons say, the euro will be a strong currency until further notice.”