The euro: So safe for the future

Janet Daley’s time is up. On the 23rd January 2009 the Sunday Telegraph journalist made a prediction. That within
six months the euro-zone would collapse. This was on BBC’s ‘Question Time’ in response to a member of the
audience, not a member of the panel. It is of course not beyond the realm of possibility her prediction over the years may yet come true but I would suggest - unlikely.

Here is a realistic and alternative ‘timeless’ prediction. Before any end to the euro-zone there’ll be a new global reserve currency. (GRC) One possibility is for the new GRC to be based on a ‘basket’ of currencies. Any such combination of the world's major currencies would certainly include the euro. Perhaps though just one reserve currency will emerge to replace the dollar.

China; nervous about the billions upon billions of US dollars it holds, which may well devalue further, has already made public noises about the desirability of a new GRC. As the country’s economic power grows so will its political muscle to effect such a change. Increasingly more countries will back such an initiative. If anyone doubts such an event could occur just consider this. How many adults alive in 1949 would have believed 1999 would realise the birth of European Monetary Union, when 12 countries including bitter enemies France and Germany, irrevocably fixed exchange rates to create the euro-zone with notes and coins to follow in 2002?

Should a new GRC be realised many politicians, grass-root activists, journalists and individuals from academia, (visceral masquerading as rational?) will rail against the event just as opponents to the euro have since that currency’s inception.
Two events, perhaps a combination of both it seems to me could doom the prediction. If the dollar should regain its strength and demonstrate long-term stability then why abolish a sound reserve currency? The other factor is China itself. To what extent will Asia’s giant prove to be a fragile superpower? Internal politics may yet prove to be extremely destabilising.

In either scenario the euro-zone will not disappear even in the unlikely event of one or more member countries eventually withdrawing from European Monetary Union. On Europe much of the right-wing media represented by Janet Daley and her ilk advocate retreating to the past, hoping thereby it will save them from the future.

Collis Gretton
22 July 2009