[geeks] Now for something completely geek

[Patrick Giagnocavo]

On Aug 27, 2006, at 10:16 AM, Mike Meredith wrote:

> On Sun, 27 Aug 2006 09:32:16 -0400, Patrick Giagnocavo wrote:
>> On Aug 27, 2006, at 6:28 AM, Mike Meredith wrote:
>>>
>>> The amount of FUD we get to hear about the Euro is astonishing. As
>>> if a nation could lose it's identity because it changes the
>>
>> I don't expect the Euro to last in its current form, more than 10
>> years.  15 tops.
>
> Out of curiosity, why ? At the very least it's convenient to have one
> currency for those places in Europe that signed up.

What the Euro allows countries to do, depends on the size of the 
country.

For instance, there are economic constraints/targets that each country 
is supposed to meet, such as "no larger a deficit than 3% of GDP".

A small country would be penalized.  A large country, like Germany, 
blew past this percentage in 2004 due to an economic slowdown, but they 
were not penalized.

This allowed Germany to basically "export" its problem and spread it 
among all the other Euro-currency nations.

Now that may have been a one-time occurrence, but it is precisely those 
sorts of stresses that will cause them problems in the future, 
especially as more Eastern European countries come on board, which are 
at a very different point in their economic development.

Plus, there are huge unfunded pension liabilities in countries like 
France and Germany, both of which have low birth rates, rates below the 
replacement rate (just as the US has Social Security liabilities).

Countries that have younger populations will be unhappy that economic 
policy is being put in place that will favor the old.

Countries that are paying out lots of pension money will have problems 
meeting the deficit targets.

Thus I figure these stresses will make the Euro less palatable to both 
the British, and the new countries coming in.  By using the "Swedish 
loophole" they may decide to be part of the EU but keep their own 
currency.

--P