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The Tears of Europe

| Opinion by *Lardius Venter

Or should that be The Tiers of Europe?


The ongoing crisis in the Eurozone caused by excessive debt levels in the Irish, Greek, Italian, Portuguese and Spanish economies has reached a stalemate with Brussels proposing a European Central Bank Bonds system which would see the richer nations guaranteeing the debt of smaller nations.

Germany, the best-performing economy in Europe, is afraid it would be tapped for more bailouts and the Premier, Angela Merkel, has refused to commit Germany to this plan, saying “We can’t solve the debt problems by creating more debt.”

As a long-term plan to aid the eurozone some economists are arguing that the euro be split into two separate currencies, but what are these likely to look like?

There are seventeen separate countries currently in the Eurozone. They are listed below in order of public debt to GDP ratio, with Greece the highest.


CountryEuroStat 2010
Greece142.8
Italy119.0
Belgium96.8
Ireland96.2
Portugal93.0
Germany83.2
France81.7
Austria72.3
Malta68.0
Netherlands62.7
Cyprus60.8
Spain60.1
Finland48.4
Slovakia41.0
Slovenia38.0
Luxembourg18.4
Estonia6.6


(It is important to note that while the public debt to GPD ratio in Belgium, Germany and France is quite high these countries are still experiencing growth through exports etc.)

Some economists have suggested splitting the euro into two currencies, basically weaker and stronger members grouped in an attempt to alleviate the major debt problems currently facing the monetary union. This would roughly correlate to a north-south geographical split.

To analyse this we can split Europe into two zones of currency, named (for convenience sake) the Nero (New Euro or Neuro) and the Southern Euro (Zuid Europa) or Zero.

So, looking at a map of Europe and the table above, the Northern Euro (or Nero) would consist of the following countries, chosen in a rather arbitrary fashion:

Germany, France, Austria, Malta, Netherlands, Finland, Slovakia, Slovenia, Luxembourg, Estonia

And the Southern Euro (Zero) would thus consist of the following countries:

Belgium, Greece, Italy, Ireland, Portugal, Cyprus, Spain

It is almost impossible to say, but it may be that the Zero would be valued at only half of the Nero. This would have the obvious result of halving the Zero countries’ external debt obligations. Imports would be twice as expensive and exports would improve, being 50% cheaper, boosting GDP growth.

It is doubtful, though, that this would be a popular option amongst many of the countries mentioned, mainly because of fiscal and sovereignty issues, but some sort of resolution to the crisis has to be achieved.

And any suggestion that the Nero is fiddling while the Zero burns would be downright mischievous.




* Lardius Venter is a fat layabout who has never worked a day in his life. He has turned to blogging in the mistaken belief that his misguided views will make a difference.

Source: www.bizpremises.co.za