Is a Euro Breakup Coming?
Is the Euro Heading for Breakup?
December 2, 2010
SAN DIEGO (ETFguide.com) – Lately, Europe can’t get any breaks. Just when euro zone officials thought one fire was put out another flares up. Europe began the year in fiscal turmoil and will likely end it in the same embarrasing fashion.
The crisis was sparked in part by Greece, who's become expert at deflecting and miscalculating its true financial state. After many lowballed estimates, it was finally decided that $110 billion euro ($145 billion) was what Greece needed to get its financial house in order. But as it turns out, debt saddled Greece was just the tip of the iceberg.
According to reports, Ireland's bailout was pegged at 85 billion euro ($115 billion) and Portugal along with Spain may not be far behind.
Europe's financial leaders continue to publicly dismiss the thought or even possibility of a euro zone divorce. When asked about this, Klaus Regling of the European Financial Stability Facility told the German media, "There's zero danger."
But others don't share that view.
“The Euro area is demonstrating just how dangerous it is to impose currency union on economies and markets that had not properly converged in the first place,” observed John Redwood Chairman of the Economic Competitiveness Policy Group.
Is the euro (NYSEArca: FXE) heading for a breakup? Many well-heeled investors like George Soros have publicly expressed their doubts about the long-term viability of the euro. The cost of borrowing has jumped for euro-land governments with weaker economies even though they are all part of the same currency union, which implies ongoing financial aid from stronger members.
In January 2010 the ETF Profit Strategy Newsletter warned about big problems ahead for the euro dollar and mapped out ways to profit. This time around, the stakes are even higher.