{"id":34617,"date":"2012-12-20T21:37:26","date_gmt":"2012-12-21T02:37:26","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=34617"},"modified":"2012-12-20T21:37:26","modified_gmt":"2012-12-21T02:37:26","slug":"why-a-eurozone-breakup-is-now-more-likely-than-ever","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/12\/20\/why-a-eurozone-breakup-is-now-more-likely-than-ever\/","title":{"rendered":"Why A Eurozone Breakup Is Now More Likely Than Ever"},"content":{"rendered":"<p>By <a href=\"http:\/\/www.MoneyMorning.com.au\" target=\"_blank\"><u>MoneyMorning.com.au<\/u><\/a> <\/p>\n<p><a class=\"post_image_link\" href=\"http:\/\/www.moneymorning.com.au\/20121221\/why-a-eurozone-breakup-is-now-more-likely-than-ever.html\" title=\"Permanent link to Why A Eurozone Breakup Is Now More Likely Than Ever\"><img loading=\"lazy\" decoding=\"async\" class=\"post_image alignleft remove_bottom_margin\" src=\"http:\/\/www.moneymorning.com.au\/wp-content\/uploads\/2012\/12\/EU-flag_lge.jpg\" width=\"220\" height=\"220\" alt=\"Eurozone break up\" \/><\/a>\n<\/p>\n<p><strong>\u00a0<\/strong>To the complete shock of several analysts, the <strong>Eurozone<\/strong> managed to make it through 2012 without breaking up. However, 2013 is another story.<\/p>\n<p>Now that Italy&#8217;s Prime Minister Mario Monti has resigned, there&#8217;s a good chance that Italy will be in the forefront of a new <strong>Eurozone crisis<\/strong>.<\/p>\n<p>That means 2013 doesn&#8217;t look to be a good year for the euro, either-especially with new Italian elections likely to take place in February.<\/p>\n<p>Of course, the EU establishment hopes that Monti can remain in office, but with four very different candidates now jockeying for position, Italy is one of the continent&#8217;s great question marks.<\/p>\n<p><span id=\"more-20446\"><\/span><\/p>\n<h4 align=\"center\">Here&#8217;s Why&#8230;<\/h4>\n<p>The leading candidates in this crucial contest include:<\/p>\n<ul>\n<li>\u00a0Silvio Berlusconi, leading the remnants of his former rightist coalition,<\/li>\n<li>Monti himself, currently in negotiations with several centrist parties,<\/li>\n<li>Luigi Bersani, leading the left-wing Democrats, currently regarded as most likely to win<\/li>\n<li>And comedian Beppe Grillo, whose Five Star Movement is leftist and anti-authoritarian.<\/li>\n<\/ul>\n<p>Of these four, only Monti and Bersani would represent the continuation of the status quo.<\/p>\n<p>Meanwhile, the return of Berlusconi, whom the establishment forced out in 2011, would be a nightmare for the euro. That goes for the ascension of Grillo as well.<\/p>\n<p>In the balance of this pivotal contest could be the fate of the Eurozone itself.<\/p>\n<p>At the extreme, Berlusconi or Grillo (or a coalition between the two) would almost certainly take Italy out of the euro, since Italy is capable of surviving independently. After all, its current account deficit is only 1.4% of GDP.<\/p>\n<p>What&#8217;s more, any move toward independence by these two would allow Italy to throw off the EU-imposed \u2018austerity\u2019 policies that have inevitably proved both unpopular and recession-causing.<\/p>\n<p>At the other end of the spectrum, a Monti government (if one could be formed) would continue austerity and allow the euro to survive &#8211; at least until some other country such as <a href=\"http:\/\/www.moneymorning.com.au\/20121205\/the-french-economy-is-doomed.html\">France<\/a> or <a href=\"http:\/\/www.moneymorning.com.au\/20120928\/why-this-crisis-still-has-a-long-way-to-run.html\">Spain<\/a> blew it up.<\/p>\n<p>In the same vein, Bersani would attempt to keep Italy in the euro but would reject public spending cuts and demand even more handouts.<\/p>\n<p>Judging by what <a href=\"http:\/\/www.dailyreckoning.com.au\/it-wont-be-long-before-the-problems-in-greece-resurface\/2012\/11\/01\/\">Greece<\/a> has been allowed to get away with, this might well work for a time, but one has to have real sympathy with the German, Finnish, Dutch and Estonian taxpayers who will be made to pay for all this.<\/p>\n<h2 style=\"text-align: center\"><span style=\"text-decoration: underline\">\u00a0<\/span>2013 Eurozone Forecast: There&#8217;s More To It Than Italy<\/h2>\n<p>And there&#8217;s the sleeper problem, France. Even if Italy doesn&#8217;t blow up the eurozone there&#8217;s a good chance <a href=\"http:\/\/www.moneymorning.com.au\/20121002\/the-next-big-eurozone-panic-could-be-over-france.html\">France will<\/a>.<\/p>\n<p>Don&#8217;t be fooled by those bond yields, either. French 10-year government bonds currently yield only 1.97%, far below the 5-6% yields of equivalent Spanish and Italian government bonds &#8211; but that only proves that bond dealers can&#8217;t recognize a crisis until it hits them in the face.<\/p>\n<p>In 2006, after all, they were trading Greek bonds at less than 0.5% yield above <a href=\"http:\/\/www.dailyreckoning.com.au\/how-german-bonds-are-just-like-a-lead-zeppelin\/2012\/07\/11\/\">German bonds<\/a>. So much for rational markets.<\/p>\n<p>What&#8217;s also worrisome are the disappearing French millionaires. They are leaving the country in droves because of <a href=\"http:\/\/www.dailyreckoning.com.au\/the-nutella-war-happening-in-the-french-economy\/2012\/11\/22\/\">President Francois Hollande&#8217;s ridiculous new tax policies<\/a>.<\/p>\n<p>It started when Bernard Arnault, France&#8217;s richest man, made headlines when he renounced his French citizenship for Belgium in October.<\/p>\n<p>However, this flight of wealth is not limited to the hyper-rich like Arnault. Last week it was revealed that French film star Gerard Depardieu had also moved to Belgium.<\/p>\n<p>Since Depardieu is a chevalier of the Legion d&#8217;honneur and of the Ordre national de Merite, it&#8217;s not as if he doesn&#8217;t have substantial ties to his homeland.<\/p>\n<p>Anecdotally, many other wealthy Frenchmen, less well-known than Arnault and Depardieu, are making the same decision. It is tough to live in a country which not only taxes your income at 75%, but then adds an annual wealth tax of up to 2% on your capital.<\/p>\n<p>Meanwhile, France currently has a budget deficit of only 4.5% of GDP, but that will go up, especially as the country is expected by the <em>Economist<\/em> team of forecasters to have only 0.1% economic growth in 2012 and none at all in 2013 &#8211; and given the exit of millionaires, the latter estimate is almost certainly too optimistic.<\/p>\n<h2 align=\"center\">A Myriad of Reasons the End Is Near<\/h2>\n<p>If you want other reasons why the eurozone might break up in 2013, there is a laundry list of reasons why the end is near.<\/p>\n<p>You can try <a href=\"http:\/\/www.moneymorning.com.au\/20120903\/dont-bet-on-greece-staying-in-the-euro.html\">Greece<\/a> (even the Germans may someday get fed up of exorbitant <a href=\"http:\/\/www.dailyreckoning.com.au\/featuring-greece-and-spain-in-battle-for-the-bailouts\/2012\/07\/23\/\">Greek bailout<\/a> demands.) Then there&#8217;s <a href=\"http:\/\/www.moneymorning.com.au\/20120924\/a-spanish-bail-out-is-coming.html\">Spain<\/a>, which is pretty rickety but no more than that, provided its richest province, Catalonia, doesn&#8217;t try to <a href=\"http:\/\/www.moneymorning.com.au\/20121030\/the-new-threat-to-the-eurozone-disintegrating-nations.html\">secede<\/a>.<\/p>\n<p>Or <a href=\"http:\/\/www.moneymorning.com.au\/20120627\/why-cyprus-has-put-its-hand-up-for-a-bailout.html\">Cyprus<\/a>, which is bust, but most likely to get a bailout from the Russian Mafia who dominate its economy. Or there&#8217;s <a href=\"http:\/\/www.dailyreckoning.com.au\/portugals-economy-is-looking-a-little-less-porky-and-a-lot-more-thin\/2012\/08\/21\/\">Portugal<\/a>, which everyone&#8217;s forgotten about and is trying manfully to solve its problems, but is expected to suffer 3% declines in GDP both this year and next &#8211; EU-imposed austerity is yet again proving very painful.<\/p>\n<p>Then there&#8217;s Slovenia, which ought to be rich and solvent, but through mismanagement has managed not to be solvent. And Ireland, which has got part way to solving its problems but isn&#8217;t out of the woods yet.<\/p>\n<p>You get the picture.<\/p>\n<p>What&#8217;s more, <a href=\"http:\/\/www.dailyreckoning.com.au\/the-euro-zone-debt-crisis-its-now-about-germany-not-up-to-germany\/2012\/06\/15\/\">Germany<\/a> has an election in September\/October 2013.<\/p>\n<p>Currently the Germans appear docile, likely to re-elect Angela Merkel, or possibly her Social Democrat opponents, who are committed to the euro and bailouts.<\/p>\n<p>But if the road between now and then has been too rocky, even German voters may decide giving the government a blank cheque for four more years of bailouts isn&#8217;t too smart.<\/p>\n<p>In that case, they will doubtless find a German equivalent of Beppe Grillo and throw the EU into even more confusion.<\/p>\n<p>It&#8217;s possible that the eurozone will survive in its current form until next December. But I wouldn&#8217;t put much money on it.<\/p>\n<p><strong>\u00a0<\/strong><strong>Martin Hutchinson<\/strong><\/p>\n<p><strong>Contributing Editor, <em>Money Morning<\/em>\u00a0 <\/strong><\/p>\n<p><strong>\u00a0<\/strong><em>Publisher\u2019s Note: <\/em>This article originally appeared in <a href=\"http:\/\/moneymorning.com\/2012\/12\/20\/2013-eurozone-forecast-why-a-eurozone-breakup-is-now-more-likely-than-ever\/\"><em>Money Morning (USA)<\/em><\/a><\/p>\n<p><strong><em>From the Archives\u2026<\/em><\/strong><\/p>\n<p><a title=\"Permanent link to Why Small-Cap Stocks Could Be Your Best Investment in 2013\" href=\"http:\/\/www.moneymorning.com.au\/20121214\/why-small-cap-stocks-could-be-your-best-investment-in-2013.html\">Why Small-Cap Stocks Could Be Your Best Investment in 2013<\/a><\/p>\n<p>14-12-2012 \u2013 Kris Sayce<\/p>\n<p><a title=\"Permanent link to How the Global Oil Grab Affects You\u2026\" href=\"http:\/\/www.moneymorning.com.au\/20121213\/how-the-global-oil-grab-affects-you.html\">How the Global Oil Grab Affects You\u2026<\/a><\/p>\n<p>13-12-2012 \u2013 Byron King <strong><\/strong><\/p>\n<p><a title=\"Permanent link to The Price of Risk in the Stock Market\" href=\"http:\/\/www.moneymorning.com.au\/20121212\/the-price-of-risk-in-the-stock-market.html\">The Price of Risk in the Stock Market<\/a><\/p>\n<p>12-12-2012 \u2013 Murray Dawes<\/p>\n<p><a title=\"Permanent link to Why Silver Could Be the Best Investment in 2013\" href=\"http:\/\/www.moneymorning.com.au\/20121211\/why-silver-could-be-the-best-investment-in-2013.html\">Why Silver Could Be the Best Investment in 2013<\/a><\/p>\n<p>11-12-2012 \u2013 Dr. Alex Cowie<\/p>\n<p><a title=\"Permanent link to The Long, Drawn Out Retreat in Australian House Prices\" href=\"http:\/\/www.moneymorning.com.au\/20121210\/the-long-drawn-out-retreat-in-australian-house-prices.html\">The Long, Drawn Out Retreat in Australian House Prices<\/a><\/p>\n<p>10-12-2012 \u2013 Dr. Alex Cowie<\/p>\n<div class=\"feedflare\">\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=DaDAM_9LVTM:Cx0UeUTQoCY:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=DaDAM_9LVTM:Cx0UeUTQoCY:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?i=DaDAM_9LVTM:Cx0UeUTQoCY:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=DaDAM_9LVTM:Cx0UeUTQoCY:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?i=DaDAM_9LVTM:Cx0UeUTQoCY:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/MoneyMorningAustralia\/~4\/DaDAM_9LVTM\" height=\"1\" width=\"1\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By MoneyMorning.com.au \u00a0To the complete shock of several analysts, the Eurozone managed to make it through 2012 without breaking up. However, 2013 is another story. Now that Italy&#8217;s Prime Minister Mario Monti has resigned, there&#8217;s a good chance that Italy will be in the forefront of a new Eurozone crisis. That means 2013 doesn&#8217;t look &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/forex-news\/2012\/12\/20\/why-a-eurozone-breakup-is-now-more-likely-than-ever\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Why A Eurozone Breakup Is Now More Likely Than Ever&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-34617","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/34617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=34617"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/34617\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=34617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=34617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=34617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}