The current economic crisis is putting even more emphasis on the euro, to the extent that its survival as the common currency of the 17 member states of the eurozone is now being openly questioned.
The current economic crisis is putting more pressure on the euro, to the extent that its survival as the common currency of the 17 member states of the euro zone is being openly questioned.
The two nations that give the most support to the euro are also the two largest economies in Europe: France and Germany, which have opposing economic trends; France has statist inclinations and is widely in favor of the euro (67% of the population is in favor) while Germany, a country that prefers a more conservative monetary policy, wants to leave (according to recent polls, only 30% of Germans want to keep the euro).
The ECB is nominally the central bank for Europe, but without Germany, the ECB is just a monetary icon representing the interests of European nations with credit issues.
The problem is more clearly focused now that there are early signs of a slowdown in German service and manufacturing production. In recent years, Germany has taken full advantage of a cheap euro. This has boosted its export-driven economy, and the country now enjoys a huge trade surplus that it is using to support the early casualties of the euro crisis, such as Greece and Ireland. With the elections on the horizon, a substantial element of the German electorate will be reluctant to vote for a party that funds unrealistic social programs in other eurozone countries. For example, popular unrest in Athens and Paris over the increase in retirement age to 62 does not resonate well in Berlin, where the retirement age is 67.
Despite all their denials, it would be imprudent for the German Bundesbank (or the Bank of France, for that matter) not to be making contingency plans to reintroduce a national currency; the costs for Germany of supporting the euro will surpass the benefits of an artificially weak currency.
Dramatic implications
If the eurozone completely unravels, the implications for our industry would be dramatic; 17 'new' currencies would be needed. The introduction of the euro saw 14 billion notes printed for the 11 eurozone countries in 2001. With the expansion of the eurozone and the need to circulate new coins as quickly as possible, there could be a unique demand exceeding 20-25 billion notes.
Of course, there are other scenarios: the favorite is a euro minus those countries with bankrupt economies, which, in effect, would allow them to 'devalue' with their new currency and recover. Another scenario is that Germany withdraws because its economy is too strong compared to the others; the new euro is led by France and encompasses fewer countries, probably without the defaulting nations.
The main problem right now is uncertainty. The financial world is in crisis, economic growth in Europe is on hold or in decline, and currently 8.450 billion banknotes are being printed that may not be necessary!
And what about the Euro 2 Series? Just as technical issues seem to be coming to an end, is there any reason to launch it until the situation becomes clear? Who will make investments in new machinery (some producers believe new machinery will be required) if the future of the euro remains in doubt.
US dollar under threat
The euro is not the only currency under threat: the US dollar is also having a tough time. And while the euro directly affects 17 participating countries and also other European countries outside the euro zone, the dollar can only be directly related to one country, the United States, but it affects the world as a reserve currency (a position it has held since the end of World War II and the Bretton Woods Agreement).
The U.S. debt is so large now, and with the country's enormous future spending commitments, many believe that the only way for the dollar is to go down, and significantly, as only if this happens, can the United States pay its debts.
But those who hold US dollars and dollar-denominated bonds would not be happy if this happened, and the United States could lose billions annually in seigniorage. However, China is already calling for a new global reserve currency and many believe it is inevitable. Should this happen soon, of the 7 billion 100-dollar bills in circulation, the majority will not have to be replaced and the volumes of other high denominations in dollars will fall.
Although such a move does not seem imminent, it is certainly a possibility in the future, and perhaps closer than we think.
Would the new reserve banknotes be physical? Would they be designed and produced by the private sector? Who would hold and distribute them? Would they be legal tender and would the public use them every day? Currently, there are more questions than answers in Europe, the US, and around the world.
The two nations that give the most support to the euro are also the two largest economies in Europe: France and Germany, which have opposing economic trends; France has statist inclinations and is widely in favor of the euro (67% of the population is in favor) while Germany, a country that prefers a more conservative monetary policy, wants to leave (according to recent polls, only 30% of Germans want to keep the euro).
The ECB is nominally the central bank for Europe, but without Germany, the ECB is just a monetary icon representing the interests of European nations with credit issues.
The problem is more clearly focused now that there are early signs of a slowdown in German service and manufacturing production. In recent years, Germany has taken full advantage of a cheap euro. This has boosted its export-driven economy, and the country now enjoys a huge trade surplus that it is using to support the early casualties of the euro crisis, such as Greece and Ireland. With the elections on the horizon, a substantial element of the German electorate will be reluctant to vote for a party that funds unrealistic social programs in other eurozone countries. For example, popular unrest in Athens and Paris over the increase in retirement age to 62 does not resonate well in Berlin, where the retirement age is 67.
Despite all their denials, it would be imprudent for the German Bundesbank (or the Bank of France, for that matter) not to be making contingency plans to reintroduce a national currency; the costs for Germany of supporting the euro will surpass the benefits of an artificially weak currency.
Dramatic implications
If the eurozone completely unravels, the implications for our industry would be dramatic; 17 'new' currencies would be needed. The introduction of the euro saw 14 billion notes printed for the 11 eurozone countries in 2001. With the expansion of the eurozone and the need to circulate new coins as quickly as possible, there could be a unique demand exceeding 20-25 billion notes.
Of course, there are other scenarios: the favorite is a euro minus those countries with bankrupt economies, which, in effect, would allow them to 'devalue' with their new currency and recover. Another scenario is that Germany withdraws because its economy is too strong compared to the others; the new euro is led by France and encompasses fewer countries, probably without the defaulting nations.
The main problem right now is uncertainty. The financial world is in crisis, economic growth in Europe is on hold or in decline, and currently 8.450 billion banknotes are being printed that may not be necessary!
And what about the Euro 2 Series? Just as technical issues seem to be coming to an end, is there any reason to launch it until the situation becomes clear? Who will make investments in new machinery (some producers believe new machinery will be required) if the future of the euro remains in doubt.
US dollar under threat
The euro is not the only currency under threat: the US dollar is also having a tough time. And while the euro directly affects 17 participating countries and also other European countries outside the euro zone, the dollar can only be directly related to one country, the United States, but it affects the world as a reserve currency (a position it has held since the end of World War II and the Bretton Woods Agreement).
The U.S. debt is so large now, and with the country's enormous future spending commitments, many believe that the only way for the dollar is to go down, and significantly, as only if this happens, can the United States pay its debts.
But those who hold US dollars and dollar-denominated bonds would not be happy if this happened, and the United States could lose billions annually in seigniorage. However, China is already calling for a new global reserve currency and many believe it is inevitable. Should this happen soon, of the 7 billion 100-dollar bills in circulation, the majority will not have to be replaced and the volumes of other high denominations in dollars will fall.
Although such a move does not seem imminent, it is certainly a possibility in the future, and perhaps closer than we think.
Would the new reserve banknotes be physical? Would they be designed and produced by the private sector? Who would hold and distribute them? Would they be legal tender and would the public use them every day? Currently, there are more questions than answers in Europe, the US, and around the world.
