Thursday, February 26, 2009

One of Europe’s most respected former central bankers says there is a serious threat to the survival of the Euro

Threat to Euro survival

Karl Otto Pohl, president of the German Bundesbank from 1980 to 1991, gave the warning in an exclusive interview with Sky's Jeff Randall. He said countries

Posted by chris @ 08:46 AM (1091 views)
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10 thoughts on “One of Europe’s most respected former central bankers says there is a serious threat to the survival of the Euro

  • Sold In 2007 For £500k says:

    “The exchange rate would go down, 50 or 60% and then interest rates would go sky high because the markets would lose all confidence.”

    What about UK interest rates???

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  • Slightly off topic…but one of my favourite indicators is throwing up some crazy signals on the EUR/GDP exchange rate. I have always looked at divergence/convergence of the equity indexes for clues about long-term currency movements. The FTSE value has steadily gained on the DAX value and has now passed it. I am amazed that this event has gone unnoticed. This is not a traditional indicator but it has served me well for the last 9 years

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  • Typical Murdoch article. Karl Otto Pohl has an agenda – he does not want to see Germany bailing out Italy et al, which is inevitable if the single currency survives. The advantages of leaving the currency is simply nowhere near as big as the enormous disadvantages – who’s the next Iceland? Rubbish like that article are just for the Sun readers. Yes there are PLENTY of severe problems and issues with EU/monetary union but people at the FT like Martin Wolf have an infinitely greater understanding of what the implications are of leaving the €.

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  • Something has to prop up the pound.

    More manipulation. IMHOpinion

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  • Come on. The Euro is the world’s strongest currency by far. It’s not going to go way away, certainly not before the GBP or the USD. You’ll see Scotland, Wales and Texas with their own currency before the Eurozone splits.
    This sort of wishful thinking from eurosceptics just shows how blind and irrational they are.

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  • notaneconomicsguru says:

    Bob1,

    I noticed it also, but I think its more that the Dax has lost its value more quickly than the FTSE. The FTSE has seemed relatively resilient against the recent big falls of the DJIA which took it way below its Nov 08 base – a huge % fall occurred on the day of Obama signing off his big stimulus bill. I was looking for DJIA to slide below 7000 and then collapse but that’s not happened. I think FTSE stayed above its Nov 2008 base during all that. Not clear to me if that is a signficant positive indicator or just some sort of glitch – time will reveal I guess

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  • notaneconomic:

    I pay no attention to the supposed reasons behind the movements and I also pay no attention to which index is perceived to be stronger/weaker. It is the convergance/divergence analysis that is useful. Obviously this indicator is only one small thing that I consider but combine it with TED spreads and you have something useful.

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  • notaneconomicsguru says:

    I guess I’m showing considerable ignorance but who or what is TED?

    It seems quite reasonable to focus on the overall trends – that is what interested me as well, but I don’t have enough understanding to be able to interpret them

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  • hello notaneconomic: The TED spread is the difference between the interest rates on interbank loans and short-term U.S. government debt. A rising TED spread often predicts a downturn in the equity markets and increased volatility in the Forex market.

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  • The euro is being stress tested.

    It’s survival depends on the majority of it’s users putting the collective interest of the eurozone as a whole ahead of their individual national interests.

    I do not believe that the German people are going to be convinced that it is in their interest to bail out Greece and Ireland, and that if they helped Italy, there would be no end to it. The Germans have an election coming up, so the politicians can’t ignore the electorate.

    As for the French, any suggestion that La belle France should dig deep to help out the other members of the eurozone would bring riots to the streets.

    I therefore believe the eurozone will fracture and fragment.

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