12.10.2012 Post in World Economy

The latest EU developments generated untold number of talks about its further prospects. The most probable outcome, though allowing for other alternatives, was the prophecy of imminent breakout of the Eurozone idea per se. An imaginary scenario was wisely baptized as Eurogeddon. Quite an artistic term appeared in the end of 2011, the time when European leaders had one summit after another and Mario Draghi gave speeches at least once a week. Since then the situation worsened in Europe. Greece rescue scenario is dimming against the background of Spain economic issues. European Union is sinking deeply into recession during perilous economic times and the only reasonable outcome could be the deliverance from fragile economies the entity is saddled with. However, France and Germany indignantly deny the possibility of such perspective. Nevertheless, any of the teetering states were supported by the strongest members and the governments had to impose more austerity measures. Investors are waiting for Greece and Portugal default, unemployment rate is growing in Spain and it seems to be impossible to deal with these circumstances. In order to initiate growth within these countries, the EU has to inject as much money as it cannot afford now.

What will happen with the European currency then? If the Eurogeddonists are right, it will face a collapse. The countries that came to grips with the default would better come back to their national currencies in order to devaluate it. Such outcome is possible only if they exit the European Union. Both financial and political experts are anticipating the EU disintegration suggesting that troubled countries will inevitably leave the Union which will result into crumble of the whole entity like a house of cards. The euro rescue will be too extravagant for the rest of the Eurozone members while return to the national currencies will be the only game in town. Until the EU pays dividends to its major regulators (Germany and France), it will exist. But even now it is possible to observe that teetering countries are trying to extract money from the rest. It is stipulated by the terms of the Union but is not beneficial for more prosperous countries.

The world is watching this situation and, of course, it is not indifferent to its outcome. But it becomes apparent not in the ability to help but in the euro discredit. Despite the probability of prolonged period of stagnation in the region, the euro stability is doubtful.