Worried about savings in Euro - should I be?

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RMCF

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What with the last week or so and all the Greece debates on the radio, with talk of default, bringing Ireland then the Euro down with it, was wondering about savings I have in Euro's.

Ok, so in a worst case scenario and we end up defaulting too, or going back to the punt or whatever, is there a chance that the value of savings could fall sharply?

I know this is all guessing at present, but might it be safer to convert the Euros into Sterling and lodge in a UK account, or is that not worth it?
 
I was listening to Peter Brown MD of Irish Institute of Financial Trading , on Pat Kenny yesterday saying the liklihood of the Euro going belly-up was increasing. He mentioned that switching out of the Euro involved considerable risks due to FX fluctuations.


He also suggested that :

  • A solution was printing money (tried by the Yanks/Brits and failing/failed; vehemently opposed by the Germans).
  • Eurobonds. Again likely to be rejected by Germans etc.
  • Debt forgiveness. ( But the impact of this might be enormous).
Ultimately he suggested that the Germans would be forced into a rescue but the price of that rescue would be effectively German control of national budgets & taxes going forward so this never happens again. Personally, I don't know how politically acceptable this will be.

Reports in the Telegraph suggests UK contingency plans are being put in place if Greece goes bust and the Euro fails. See here. The more I read about this, the more alarmed I am. I'm really not sure the Euro can survive all this or that savings are safe. Personally I am considering switching more savings into shares.
 
If Ireland were to leave the Euro and introduce the punt again, then all savings within the state would be converted to the new punt. As the political idea of the whole exercise would be to devalue the currency, any savings would also be devalued.
I agree with horusd, that printing money is not an option and Germany would never support a Eurobond. Debt forgiveness may be a nice way of saying that you "allow" a country to default, but I believe that for Greece and Ireland and possibly Portugal, default is the only option.

I also don't think that German taxpayers will see a benefit in bailing out other countries in return for a say in that countries fiscal policies. The Euro was never a very popular idea in Germany and increasing amounts of people are in favour of leaving it and revert back to the Deutsche Mark. Political pressure could become so large that the German government, regardless of its political leaning, would see its hand forced.

I've recommended a book on the Euro by Phillipp Bagus on other threads, I found it very eye opening to the utter flaws of the Euro: http://mises.org/resources/6045/The-Tragedy-of-the-Euro
I used to be an ardent proponent of the Euro, but that has completely changed now. This has also steered me towards reducing my cash holdings and increasing equity and commodity holdings.
 
horusd said:
I was listening to a guy on Pat Kenny yesterday saying the liklihood of the Euro going belly-up was increasing. He mentioned that switching out of the Euro involved considerable risks due to FX fluctuations.


He also suggested that :

  • A solution was printing money (tried by the Yanks/Brits and failing/failed; vehemently opposed by the Germans).
  • Eurobonds. Again likely to be rejected by Germans etc.
  • Debt forgiveness. ( But the impact of this might be enormous).
Ultimately he suggested that the Germans would be forced into a rescue but the price of that rescue would be effectively German control of national budgets & taxes going forward so this never happens again. Personally, I don't know how politically acceptable this will be.

Reports in the Telegraph suggests UK contingency plans are being put in place if Greece goes bust and the Euro fails. See here. The more I read about this, the more alarmed I am. I'm really not sure the Euro can survive all this or that savings are safe. Personally I am considering switching more savings into shares.
Click to expand...

The biggest losers would be France, Germany and Britain see chart in link below, but I feel that Greece will not default and the president will get a vote of confidences today. The Euro will be kept for at least couple of years and then it may change.


Jack Straw is the opposition and he is just making his voice being heard but he should have done it when he was in power for 13 years he was just like Blair out to line their own pockets.

http://www.bbc.co.uk/news/business-13798000
 
As Peter Browne pointed out on the Pat Kenny Show, if you had moved your money into US dollars in January, you would have lost around 10% as the euro has appreciated against the dollar since then.

There is no risk free place for your money, so spread it around.
 
Just wondering,
If you are self employed and are putting money aside for your tax bill should you be paying it ahead of time to revenue in case anything sudden happens?

secondly, would it not be good exposure to have savings in a strong European Euro bank in a big economy like France or Germany as surely these countries would not have to devalue in event of Euro breakup unlike Ireland ?

What is a strong Euro bank. The biggest exposure to the Greek debt outside of Greece are German and French banks.
Someone told me a couple of days ago that BNP Parisbank are strongest. Is there anyway of accessing these Euro banks balance sheets or their level of exposure? Even better is there a report thats already done this?
 
Troy McClure said:
Just wondering,
If you are self employed and are putting money aside for your tax bill should you be paying it ahead of time to revenue in case anything sudden happens?

secondly, would it not be good exposure to have savings in a strong European Euro bank in a big economy like France or Germany as surely these countries would not have to devalue in event of Euro breakup unlike Ireland ?

What is a strong Euro bank. The biggest exposure to the Greek debt outside of Greece are German and French banks.
Someone told me a couple of days ago that BNP Parisbank are strongest. Is there anyway of accessing these Euro banks balance sheets or their level of exposure? Even better is there a report thats already done this?
Click to expand...

If the Euro breaks up (and it won't although there will be changes), there won't be any strong European banks. It's not just about exposure to Greece, Ireland and Portugal.
 
What about Rabobank in the Netherlands - a strong economy, a AAA rated bank in a country where you would think that in the event of a breakup of the euro or similar event that the Dutch currency would be one of the "stronger" currencies ???
I'm planning a trip to open a Dutch euro savings account and would welcome any thoughts on considerations that I may have missed.....
 
horusd said:
I was listening to Peter Brown MD of Irish Institute of Financial Trading , on Pat Kenny yesterday saying the liklihood of the Euro going belly-up was increasing. He mentioned that switching out of the Euro involved considerable risks due to FX fluctuations.


He also suggested that :

  • A solution was printing money (tried by the Yanks/Brits and failing/failed; vehemently opposed by the Germans).
  • Eurobonds. Again likely to be rejected by Germans etc.
  • Debt forgiveness. ( But the impact of this might be enormous).
Ultimately he suggested that the Germans would be forced into a rescue but the price of that rescue would be effectively German control of national budgets & taxes going forward so this never happens again. Personally, I don't know how politically acceptable this will be.

Reports in the Telegraph suggests UK contingency plans are being put in place if Greece goes bust and the Euro fails. See here. The more I read about this, the more alarmed I am. I'm really not sure the Euro can survive all this or that savings are safe. Personally I am considering switching more savings into shares.
Click to expand...


thier will be a stock market collapse if the euro dies
 
farmerette said:
thier will be a stock market collapse if the euro dies
Click to expand...

Maybe short-term. But I'd rather have my money in owning part of a company than solely owning a risky currency. If the Euro fails, good companies will survive and recover in whatever currency they operate in.
 
I am seriously considering opening a non euro a/c.What are the procedures involved, and has anyone any opinions/advice?
 
There is no way the Euro will collapse. The more this crisis deepens the more the Euro appreciates. Playing tough with Greece (even to the point of default) is good for the Euro as it shows that the ECB/EU are not prepared to print themselves out of this crisis as the US/UK are attempting. 10 year, nay 30 year, German Euro bonds are amongst the lowest yielding assets in the world proving the utter confidence the market has in the currency per se.

Will Ireland withdraw from the Euro and what would be the consequences? A different question but it is impossible to see how this could ever be achieved on practical grounds. Before it was even discussed by the powers that be there would have to be an immediate and effective imposition of capital controls agreed with our 26 EU partners without anybody having an inkling that it was coming. Then, maybe, we could spend the next 6 months putting in place the logistics of the move to the new currency (took at least 3 years to introduce the Euro). During these 6 months Euros would be the functional currency, so now we have to, as well as imposing international capital controls, place controls on how much Euros people can take out of their domestic banks and store in suitcases. I repeat that there is simply no way that the apparatus of a new currency could be in place overnight without the dogs in the street having been aware of it for maybe three months. There would simply be no savings left in Ireland to convert to the new punt.

And what possible good would it all do? Most of Ireland's Euro denominated sovereign debt and nearly all the ECB funding of €150Bn would need to be repaid in Euros not punts. Leaving the Euro is not a soft route to default that would not be interpreted in international law as a default, so why not simply default? Meanwhile the punt collapses to 50c and with it our GDP until such times as maybe we get an export driven recovery and don't hold your breath for that as US MNCs take absolute fright at the devlopments. So overnight our debt/GDP ratio more or less doubles.

Ireland might restructure, Ireland might even default with EU agreement, Ireland will never unilaterally leave the Euro.

So what about Germany kicking us out of the currency? Conceptually, I'm sure most Germans would love to go back to the D-mark but the above Armageddon would hit Germany as much as the periphery. It is the Germans and the ECB who are owed all these Euros by the periphery, how silly it would be to precipitate a collapse in the earning power of the debtor nations and how silly to trigger a world depression which would make the 1930s look like boom time.:(

The fact is that the world has never, ever been here before. Comparisons with Argentina just don't stack up. Breaking the peg of the peso with the US dollar is logistical chicken feed compared with withdrawing from a currency union.
 
Duke of Marmalade said:
The fact is that the world has never, ever been here before. Comparisons with Argentina just don't stack up. Breaking the peg of the peso with the US dollar is logistical chicken feed compared with withdrawing from a currency union.
Click to expand...

I fully agree with you, back is not an option... but forward will also bring a lot of changes that no one ever expected. The future will require much tighter coordination than I expect any of the politicians ever imagined and it is going to take some time and several more bumps along the road before it gets sorted out. The Germans will eventually have to accept Euro Bonds weather they like it or not and for Ireland it will I expect mean bring the lines of credit into sync with the rest of the zone - so don't expect cheap credit any time soon.

Many of my work colleagues are middle aged Germans and French and one point they always make about the EU, is that whatever else it has at least prevented war in Europe for the past 60 years and this is very deeply engrained in their minds - most have heard stories for their parents about what war means. So one should keep in mind that unlike us, it is not just about economics for them...

Jim.
 
Would there be any sense in maybe moving 75% of my € savings into £ and lodging it in my NI bank account?
 
Switching to other currencies is a bad idea as The Duke and Brendan point out in an earlier post the Euro has been appreciating recently.

A euro investor who held Sterling since 1999 would now be distinctly unhappy.

[broken link removed]

We have recently launched a safety first portfolio comprised of four funds invested in highly rated government and corporate bonds from four of the worlds largest fund managers who together manage more than $5 trillion.

[broken link removed]

[broken link removed]
 
Duke of Marmalade said:
There is no way the Euro will collapse. The more this crisis deepens the more the Euro appreciates. Playing tough with Greece (even to the point of default) is good for the Euro as it shows that the ECB/EU are not prepared to print themselves out of this crisis as the US/UK are attempting.
Click to expand...
I think your interpretation is a little off there. The Euro has weakened every time there was news about the crisis getting worse. Only when there was some sort of intervention that essentially kicked the can down the road did the Euro increase again. And it has only been increasing against other very bad currencies like Sterling and US$ in an ugly contest. Against currencies like the CHF, AUS and especially gold the Euro has been decreasing significantly.
I agree that forcing Greece into default would be very positive for the Euro, but the exact opposite is what is actually happening. It's like an alcoholic sitting at a bar saying "I'm serious bar man, I'm giving up drink tomorrow, and to prove it to you I will not have the whiskey chaser with my pints tonight."
While the ECB may not be printing money at the same level as the BoE or FED, they are still printing money. More importantly they are way ahead of other central banks in qualitative easing. It used to be the case that only investment grade bonds could be deposited with the ECB as collateral for loans. When Greece slipped into junk bond territory their bonds were first temporarily accepted and now Greece's bonds will be accepted no matter how bad their rating becomes.

Duke of Marmalade said:
10 year, nay 30 year, German Euro bonds are amongst the lowest yielding assets in the world proving the utter confidence the market has in the currency per se.
Click to expand...
The reason people are buying German Euro bonds has not so much to do with confidence in the Euro, but with confidence in the German economy and the fact that if the Euro failed the Deutsche Mark would once again be seen as one of the go to currencies.

Duke of Marmalade said:
Ireland might restructure, Ireland might even default with EU agreement, Ireland will never unilaterally leave the Euro.
Click to expand...
I agree with your arguments that led to this conclusion. I think that leaving the Euro would be pretty much impossible at present unless there is a significant default on debt.

Jim2007 said:
Many of my work colleagues are middle aged Germans and French and one point they always make about the EU, is that whatever else it has at least prevented war in Europe for the past 60 years and this is very deeply engrained in their minds - most have heard stories for their parents about what war means. So one should keep in mind that unlike us, it is not just about economics for them...
Click to expand...
This is true, but remember that the Euro had nothing to do with providing that stability. If anything, you can argue that the EMU has made conflict, at least verbal and political, more likely.
The founders of EU project had specifically in mind to provide an environment in which war in Europe would not occur again. Their ideas were based on something French economist Bastiat said "If goods don’t cross borders, armies will". Thus the idea of free movement of people, goods, services and capital was born, and its success in fostering peace and incredible economic cooperation was immense.
 
Chris,

I think we agree that the Euro is better than the two major alternatives, the dollar and sterling. The quadrupling of the Gold price over the last decade is frightening and does suggest that there is at least a fear of hyper inflation. And yet index linked bonds tell us that the market expects very subdued inflation even over the very long term. All very confusing.:confused:

Yes, everytime there is an EZ jitter the Euro sneezes, I guess that is out of fear that there might be come cave in on debt forgiveness by cranking up the printing presses. Then it recovers as markets see that this is not going to happen, yet.

Hard to disagree with your analogy of the alcoholic, at least so far as Greece is concerned.:)

Now, those German 30 year Euro Bond yields. You raise an interesting third option which I hadn't addressed, namely that Germany would unilaterally pull out of the Euro. Of the three (1. Ireland leaves, 2. Ireland is kicked out, 3 Germany leaves) this one is the least unlikely but it would still be a very risky move by Germany more or less triggering the same consequences as kicking the periphery out of the club. In any case, it would be a breach of international law to redenominate the currency of their international debt obligations, and why should they if they expected the D-mark to appreciate? German Euro Bonds will be paid in Euros no matter if there is a new D-mark so I do think the low yields on these is a vote of confidence in the Euro. When it comes to the elevated Irish Bond yields I think there are two fears, one of default of course, and the other of redenomination into Punt Nua.:(
 
In Nov 2010 I put about 17% of my (fairly modest) savings into gold (physical bars which I hold). I did this after spending a lot of time holding out against the advice of others - I felt it had to be a bad move to buy gold in the teeth of the worst turmoil since WW2. But it finally dawned on me that holding most of my savings in Euro was not a default, safe, straightforward decision but that it was actually an active investment in the strength of the Euro. I'm glad I bought some gold now.

But I worry about the rest of my savings - mostly in Ulster Bank and Credit Union. I am inclined to agree that the sterling/dollar alternatives are not great. One way or another, it seems inevitable that changes will come for the Euro and Ireland and Irish savers are unlikely to emerge well out of it.

My question is - would I be safer if I held (at least some of) my Euro savings in cash (Euro notes)?? Would this at least remove the risk that that portion of my savings could be changed to a punt nua, etc. I understand it would not help in the event of a depreciation, but at least, if Ireland leaves or is kicked out of the Euro, I will still hold these physical Euros which would be more valuable in my hand than being changed, magically, to punt nuas in my bank account.
 
hi guys,

i have been told that the canadian dollar might be a safe bet in terms of currencies? any thoughts ?
 
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