Impact on the Euro Zone and the Euro
The effect on the Euro as single currency may hinge on the vote that is set to determine the UK’s position as a member.
Let’s lay out the facts, Greece is set to default again as the draconian measures on its people is starting to create political instability in the country. Tourism creates around 35% of GDP in Greece, and there are obvious fears about immigration and the locality to a hot bed of political unrest.
Italy is in dire straits again, with bail out packages of the large banks, who are in trouble, bailing out small banks in trouble. Low growth, massive youth unemployment and uncertainty about how to fund the terms of their bail out has meant the economy is literally on its knees.
Spain has had a surge in holiday bookings as it is deemed the safest sunny place to visit with Turkey, Egypt and Tunisia losing 30% of its business to the Iberian Peninsula.
Portugal is now starting to show signs of economic stability due to the return to favour of holiday makers, Portugal is recording a record increase in bookings and by summers end is expected to have its best year ever, with an increase of 30% on the last year, due to its location in the westerly part of Europe.
France is eying up how to take advantage of the instability and with riots on the streets over new labour laws, Europe is definitely starting to bend and buckle.
In fact, as the German economy that just keeps growing and growing and is the real bright spot in Europe, yet fears of changes in leadership and further swings to the right politically, due to the immigration issues leaves Europe in a very unusual position.
Its currency binds countries to trade and economic freedoms, that on the whole are great for free trade within the group and offer a solidarity when negotiating with the US and China regarding trade agreements, but many are unhappy that the debt levels and constant bailouts add little to a free Europe view.
Ireland has been devastated by the terms of its bailout and is still reeling from the crash from prosperity to poverty over that fateful two year period, changes in the way Europe handles taxation from conglomerates, which was the only real feather in Irelands cap, as companies set up and pay tax in Ireland at low rates and move money around in complex licensing agreements within its own shelf companies across high and low taxation zones, creating almost zero tax liabilities in the countries, like England and France.
Austria is closing its borders and many of the smaller states in the direct line of the economic refugees from North Africa Syria, Afghanistan and Iraq are following suit. Ways of dealing with a migration crisis and a humanitarian one is difficult to tackle. The large number of mainly Muslim males between the ages of 18 to 25 is causing local safety fears and the obvious threat of terrorism is always part of the public debate.
So what for the Euro as the individual countries lurch from one issue to another with the shadow of the second largest economy in the world starting to slow and struggle as it faces its own debt crisis, that could make the last one look small in comparison.
Countries like Australia and Canada, who are largely dependent on resource based revenues, are looking down the barrel of a major depression in these key industries as the Chinese growth slows visibly. It has even been suggested the figures are manufactured by the government to keep the sentiment high, another mini crash could upset the whole world order. This will all have an effect on the Euro
So the question is, are we starting to see the first real cracks in the Euro Zone saga and what happens if the UK, Greece and even France explore their options to leave?
Over time as changes occur if the currency and countries in the Euro Zone hold together the future for the Euro could improve. There is a lot of bad news, un-knows and fear mongering, factored into current Euro cross rates. Overcome these and we could see a strong Euro emerge if economics, politics and nationalism don’t get in the way.