The Washington Times (of all places) carries a UPI text about a Deutsch Bank research note on the economic consequences of the French ‘no’:
“France’s rejection of the European Union constitutional treaty by a majority of 54.9 percent is a severe blow to European integration and threatens to depress European economy back into eurosclerosis as in the 1980s, warns Deutsche Bank in a research analysis published Monday.”
““Financial markets have put pressure on the euro. The new member states, and particularly Turkey, are at risk of being affected in terms of an increase in exchange rate volatility and a widening of interest rate spreads,” warns the report by Germany’s biggest bank
and then comes the really interesting bit:
“Speculation among some observers that the French no may put the European monetary union at stake are exaggerated, the bank emphasizes. All 12 member countries are firmly committed to the EMU. A break-up would not only involve enormous costs in terms of lower growth due to dampened trade and higher interest rates, but also in terms of the technical costs of changeover”
Clearly Deutsch bank are right, monetary union is not at stake, in this moment. I don’t think anyone is suggesting it is. And obviously no-one in their right minds is suggesting that the ten members are likely to sit down and call it a day. The question is: will pressures on the monetary union mount to such an extent, that one member or another may be forced out. The point is if you attack a straw man, it’s easy to win the argument. It is more difficult to address the real issue.
Having said that, what is astounding is how this topic is going the rounds, even at the level of naysaying. As I said in a previous post what the French vote has done is move Euro break-up from being a taboo topic, to being a question which can be freely discussed on its merits. A threshold has been crossed.
Symtomatic of the change is the tone of this piece in : MS GEF by Joachim Fels today
“political disunity within Europe raises doubts about the long-run viability of the euro. It is important to remember that, rightly or wrongly, the euro?s founding fathers envisaged it to be a stepping stone towards a European political union. The idea was that by creating a single currency, national governments would over time be forced to cooperate more closely on economic, fiscal, and other policies, culminating in a single political entity that would back the single currency. Yet, in the last several years, serious cracks have opened up in Europe?s political compound, suggesting that political union will remain a pipe dream“.
Note again, Fels says, long run viability.