What can we expect to happen if the euro collapses?

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Calico

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Given the problems in Greece (and Ireland, Spain and Portugal) along with the fact that major players in the hedge fund market are now betting against the euro, if it does indeed collapse, how will it happen?

Will a transition back to the punt create roaring inflation?

And other than holding dollars, gold and works of art, what are the best ways to protect against the effects? What will it mean for our euro debts?
 
David McWilliams was very clear that Ireland should leave the euro. Everyone dismissed this as nonsense, but just in case it happens...

Euro deposits in AIB will presumbably be converted into devalued punts.

I presume that it is the same for deposits in Northern Rock and Rabobank.

Would I be better off transferring my money now into a German bank?

I have a UK investment which I am in the process of unwinding. Should I keep it in a bank account in the UK in sterling?

How would Irish shares be affected? Most of the large plcs - CRH, DCC,Ryanair have few assets in Ireland.
 
And what about our mortgages?

If I have €50k on deposit and €100k of a mortgage.

If I move the €50k into German euros, then am I on a win/win situation.

If there is no devaluation, I am not affected.

if there is a devaluation, then my German euros will be worth more than 50% of my mortgage?
 
Is this a realistic threat? Am looking at the xe.com site and don't see any major movements in the euro v stg. Where is all of this panic coming from?
 
Brendan said:
And what about our mortgages?

If I have €50k on deposit and €100k of a mortgage.

If I move the €50k into German euros, then am I on a win/win situation.

If there is no devaluation, I am not affected.

if there is a devaluation, then my German euros will be worth more than 50% of my mortgage?
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What's a German euro ?
 
jhegarty - it sounds fanciful, but remember the euro is one great experiment. There are no precedents when it comes to it. Over the past c.10 years there was nothing to harm the euro but the next 10 look decidedly precarious.

The fact that some very big hedge funds are now betting against it, along with commentators alot more learned than me predicting it's collapse, should be enough cause to at least pique our interest.

Presumably, from Brendan's post, worst case scenario, the euro still survives in the likes of France & Germany so money deposited there is safer? Or is it a case of one or two members leaving bringing the whole monetary union down? Even if not, the value of the euro would likely fall through the floor if some members left.

As for Northern Rock, deposits are guaranteed by HM Treasury so I would have thought they are not converted back into punts? Simlar with Rabodirect?
 
jhegarty said:
What's a German euro ?
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Whats an Irish Euro..? There were stories that in some countries they checked the codes on the notes and would not taken foreign notes.

Can you even tell easily where a note is issued from the serial number?
 
There is no panic.

But just a bit of long-term planning.

If Ireland exits the euro, I imagine that the deposits in Irish banks will be converted back into punts.

So a "German euro" is a deposit in a German bank.

Brendan
 
Brendan said:
And what about our mortgages?
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If we exit to Euro, is it bye bye to the tracker?

Presumably leaving the Euro will be classed an an extraordinary event allowing banks to get out of tracker rate mortgages. The ECB rate will no longer be the reference point for the tracker mortgage if the mortgages are denominated in punts.

If the mortgages remain denominated in Euro but our currency becomes the punt, we then have fx risk in our mortgages as alluded to by Brendan.
 
NorfBank said:
If we exit to Euro, is it bye bye to the tracker?
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Is it? Was it Argentina where people had dollar tracking mortgages, but then the local currency devalued/hyper inflated they were still stuck paying their dollar mortgages with a greatly devalued local currency.

I remember an interview on the radio (Dunphy?) pre euro with the man (half Irish?) who was originally in charge of implementing the euro project in Europe, but left/fired as he came to the conclusion the project would fail. He had written book on the subject and was going the interview rounds to sell it. Does any know his or the books name?
 
Well there is certainly no harm in spreading the risk. I'm very nervous about leaving deposits in Irish banks.

Would Euros as cash be deemed safe? or a mixture of US Dollars, Sterling and Euros? or maybe good old fashioned gold?
 
Towger said:
I remember an interview on the radio (Dunphy?) pre euro with the man (half Irish?) who was originally in charge of implementing the euro project in Europe, but left/fired as he came to the conclusion the project would fail. He had written book on the subject and was going the interview rounds to sell it. Does any know his or the books name?
Click to expand...

Presumably you're thinking of http://www.amazon.com/Rotten-Heart-Europe-Dirty-Europes/dp/057117521X (Bernard Connolly) who wrote the Rotten Heart of Europe about ERM etc?
 
Brendan said:
David McWilliams was very clear that Ireland should leave the euro. Everyone dismissed this as nonsense, but just in case it happens...

Euro deposits in AIB will presumbably be converted into devalued punts.
Click to expand...


I'm trying to understand this

In what way would the Euros be converted into "devalued" punts ?

What would be devalued?

Surely at 00:00 (midnight) on day one of the new currency (call it the new punt), one euro would equal exactly one new punt.

Then over time the markets would decide if the new punt would rise against the euro, or fall against the euro.

If we were lucky, the new punt could rise against the euro, it wouldn't necessarily devalue, we wouldn't necessarily be all worse off.

It's a little bit similar (althought not the same) as 1979, when the Irish pound was tied to sterling. Then the link was broken, and the markets decided over time if the pound would rise or fall against the punt..
 
Calico said:
The fact that some very big hedge funds are now betting against it, along with commentators alot more learned than me predicting it's collapse, should be enough cause to at least pique our interest.
Click to expand...

Is that's what happening to weaken the Euro, that hedge funds are betting against it, they want Greece to collapse? Who are these hedge funds?
 
But where/how is it weakening? I'm not seeing any major changes from the last week or so - actually it was at .86 against sterling two weeks ago and is now .88?
 
Would you like our government handling our punt? they can do what they like then.
 
Ethan 1 said:
Very interesting article here

http://www.telegraph.co.uk/finance/...il-out-as-EU-creates-economic-government.html

Can paragraph 6 be a misprint

German exposure to the region amounts to €43bn in Greece, €47bn in Portugal, €193bn in Ireland, and €240bn in Spain, according to the Bank for International Settlements. German lenders are already vulnerable, with the world's lowest risk-adjusted capital ratios bar Japan.

:eek:
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I reckon (although I have no basis for this) that they are taking into account the balance sheets of the German banks' IFSC offshoots in that figure.
 
Well if somehow we left the euro and were given punts on a 1 to1 basis for our euros,it wouldn`t be long before our politicians ceded to every interest group demands and started printing punts . This would of course move our currency lower and some would argue like Mc williams that this is a good thing because imports would become expensive and irish produced goods would be cheaper,meaning a balance of payments surplus. However one could say the same about any poor country where imports are really expensive....the point is the majority of people ,myself included will be poorer and will have to pay more in the supermarkets.Its O.K. for the elite who will compensate by getting ever increasing salaries,but the majority will have lower spending power. SO I SAy ,I will do all in my power to keep the money printing press out of the hands of our government. At least with the euro, they have to have a bit of discipline. Another factor is the E.U.could retaliate by putting presure on our low corporation tax.
 
Sherman said:
I reckon (although I have no basis for this) that they are taking into account the balance sheets of the German banks' IFSC offshoots in that figure.
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Depfa bank in particular turned into a money pit - the German government had to put in place something like 100 billion in loan guarantees.



Naturally, the Germans weren't that pleased with the performance of the Irish regulator.

I think Irish people like the euro though and if there was any risk of changing people would still be using euros. Shops and tradesmen would probably still take euros after the change. If you look at Poland or the Czech republic, you can use euros there no problem. Montenegro even uses it as its currency although its not an official eurozone member. It would be one thing to bring in new punts, it would be another to get people to use them without it turning into a Zimbabwe situation.

The Germans are probably glad the currency is weakening a small bit - they have already lost their crown as world's biggest exporter to China and a strong euro against the dollar was affecting their exporters.
 
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