Everyone loves a good doomsday story.
It seems that the euro is going to end in such a way, according to many pundits. They see a collapsing currency and rioting in the streets as the euro falls apart and trades at half of where it is today amid massive defaults by Spain, Italy and Greece.
However, there is another scenario. There is a rumor that the Netherlands may want to leave the euro not because it is too weak but rather because it is too strong.
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In this type of scenario, we could see a Northern and Southern euro currency.
The Northern euro would be the strong Scandinavian countries, Denmark, the Netherlands, Germany, France, etc. The Southern euro would be the so-called Club Med nations of Portugal, Spain, Greece and Italy.
You would probably see these currencies trade in two ways. Right now, the euro trades at around $1.32. Its high of 2008 was $1.60 or so and its all time low 83 cents set back in 2001.
I would see the Northern euro being a very strong currency and climbing back to that $1.60 level and the southern euro being a weak currency going back to the $1.00 level. This would help the tourism and export markets of the South. I don’t think the North would suffer that much.
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People buy German goods because they are top tier. An extra 15 to 20 percent pop in the currency won’t change this. People are still going to buy Mercedes-Benz and BMW cars.
I don’t see a euro breakup as a “doom and gloom” scenario but rather a dividing of two currencies: one strong, one weak. In the long run, this might be the best thing for the continent.
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