What happens if euro collapse

Could the euro could surpass the US dollar as a reserve currency within 10 years? Yet there are doubts that events can move so fast. This is borne out by history. Frankel and Chinn point out that rankings of international currencies change only very slowly. Although the US overtook the UK in economic size in , in exports in , and as a net creditor in , the dollar did not surpass the pound as the leading international currency until A shorter timeframe is seen as even less likely.

One manager points out that no other currency is backed by a sufficient financial and economic infrastructure to be able to challenge the dollar. The development of the financial sector takes decades, and a developed financial sector which has endured financial crises of different kinds, is certainly not seen outside the US, Europe and Japan. Could the political unpopularity of the US accelerate the flight from the dollar? Frankel points out that, in the past, US deficits have been manageable because allies have been willing to pay a financial price to support US global leadership.

In the s, Germany was willing to forego the costs of stationing US troops in the country to save the US from a balance of payments deficit. Similarly, Japan was willing to buy dollars to prevent the US currency from depreciating in the s, the s and the s. Most of the managers who responded to the survey think that the US can continue to count on foreign financial support.

An overwhelming majority disagree with the suggestion that the post-Iraq unpopularity of the US will discourage central banks in Europe and Japan from supporting the dollar.

Some however, feel that it reflects the relatively better shape of European economic policy compared with that of the US. It must also be noted that in the event of the euro breaking up, the Government is very likely to immediately restrict mass outflows of money. No option is pain-free and charges will apply along the way if you decide to move money. Enter email address This field is required Sign Up.

While there is much uncertainty about the single currency in investment terms, there is not a strong case for buying up sterling. The euro has kept par remarkably strongly against sterling and the dollar, despite the chaos. This weekend against sterling the euro is within a penny of where it started the year, at around 85 or 86 pence. There have been fluctuations. The euro went as high as 90 pence in July. Longer-term, sterling looks set to decline slowly.

If Britain were to negotiate a Customs Union with the EU, like Turkey, it would find its trade policies with the rest of the world still determined in Brussels, but with less input from London. Again, under a Customs Union it would only have a guarantee of access to the EU market for goods but not for services. Britain might, of course, simply leave the EU without negotiating any special deal.

That would leave it paying tariffs on its exports to all EU member states. In the case of Ireland, it would mean the re-introduction of customs posts along the border and would undermine years of peacemaking by successive Irish and UK Governments. There has never been passport control within the island of Ireland, but if as a non-EU country the UK wanted immigration controls against immigrants from any EU states it would have to introduce passport checks all along the Irish border, reminiscent of conditions during the worst of the Troubles.

The pressures causing fractures within the EU derive from a lack of understanding among the general public of the extent to which their livelihoods depend on economic developments in other countries.

Political leaders make little effort to explain this because to do so would undermine the nationalist myths which brought most states into being in the first place. And because it is often convenient to blame the EU for necessary but unpalatable decisions. No venue has been created in which an EU-wide public opinion might be formed, even though the EU needs more democratic cement to hold itself together. European Parliament elections are not truly European because they are 27 different elections with different electoral systems after campaigns in which national issues predominate.

The European Parliament has itself refused to contemplate the election of some members from EU-wide party lists, which might have begun a process of creating an EU-wide debate because it would have meant pan-European political campaigns.

Under present procedures, both the President of the European Commission and the President of the European Council are selected in private meetings of heads of government. This lack of democratic legitimacy is increasingly problematic because the policy response to the euro crisis requires decisions on redistributing resources to be taken at EU level.

It is vital that the EU is made visibly more democratic and that Europeans come to feel they can have the same direct say in who governs the EU that they have in their own country.

Some 10 years ago, as a member of the Convention that drafted what eventually became the Lisbon treaty, I suggested that the President of the European Commission should be chosen directly by the people of the EU in a multi-candidate election in which every EU citizen would vote, rather than be selected by 27 heads of government, meeting in private.

This proposal received almost no support although it has recently been adopted as policy by the ruling German centre-right CDU party and by the European People Party, the largest in the European Parliament.

If my proposal had been accepted when originally proposed, the EU would now be in a much stronger democratic position to devise a more coherent response to the euro crisis. A European Commission headed by a President with a full EU-wide democratic mandate would have more authority to propose solutions.

And although the Council of 27 heads of government would still play a vital role, the EU would be less constrained by the electoral timetables of individual countries. Another useful proposal is that European political parties should say in advance who their candidate would be for Commission president before the European elections.

A difficulty with this is that it would subordinate the Commission to shifting coalition politics within the European Parliament. The direct election of the Commission President by using a transferrable vote system of Proportional Representation would be a better way to involve people in the affairs of the EU.

Others fear the people might choose an unsuitable or unrepresentative candidate, but that could be catered for by allowing candidate, but that could be catered for by allowing candidates to stand only if first been nominated by a minimum number of European MEPs and national MPs drawn from a sufficiently large number of EU countries.

Like markets, a Demos is a political construct that has to be created by a political act. Democracy is more than an added ingredient in the construction of European Unity.

In the 21 st century it must become its motor. About us Organisation Departments Awards Sponsors. Press releases. Facebook Twitter WhatsApp Viber. Greek government debt will have to be forgiven. The ESM has to be seen as big enough to stand on a contingency basis, behind Spain and other countries that may get into difficulty.

Press releases Deputy Prime Minister of Montenegro Dr. Researches Development of the Western World — from the 18th century till today. Your experience on this site will be improved by allowing cookies. Allow cookies. Rather than experiencing a sudden collapse, the EU would thus instead sink slowly into oblivion. Perhaps as a message of comfort for those who want to maintain the EU, many if not all states, empires, regional organisations, currency areas, and federations have previously struggled with similar problems.

It is no surprise that many political formations have disintegrated or still face disintegrative challenges just think of Spain, Canada, Belgium, and the UK. The EU still obtains necessary resources to strengthen its locking-in capacity and attractiveness from member states such as Germany, which are relatively satisfied about the EU, more loyal to the EU, and perceiving the EU still as the best or least bad alternative to attain security, prosperity, or environmental sustainability.

This will allow the EU to limp ahead for the years to come, but with many members rather grudgingly accepting it as the least unattractive option. It represents the views of the authors and not those of the Brexit blog, nor the LSE. It does not point out how the whole dynamic would change if the UK succeeds in leaving the EU.

It would set a terrible example to other countries, especially Eastern European members of the EU. This would set off a snowball effect, with further countries wanting to leave the EU.

This is something Tony Blair hiss! They want to set off a snowball effect, where further countries leave the EU. This is why Steve Bannon wants to set up an office in Brussels. This why the European Parliament elections next year are so scary, with right-wing parties on the move all over Europe.

Visegrad, Nordics, France-Germany-Benelux, for example. And that the external borders of these will be the lines on which the EU breaks apart into its constituent blocs. Friederich is completely right in his comment. The sheer determination to pursue this aim is clearly evident: there is no room for compromise for the EU.