Eurozone faces hard choices

Marketplace Staff May 20, 2010
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Eurozone faces hard choices

Marketplace Staff May 20, 2010
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At a conference in Berlin, German Chancellor Angela Merkel called for greater cooperation on financial regulation. That comes after Germany took its own, unilateral action to stop some kinds of speculation against European governments. Merkel says that the euro itself is “in danger” because of the market turmoil.

What are the Germans worried about?

Germans are worried that the euro might fail. German Chancellor Angela Merkel said if Europe doesn’t tackle this crisis, the euro could fail. The French finance minister rejected that saying the euro is not in danger. This underlines a fundamental problem for the single currency — the growing split between Germany and France, the two most important countries in the eurozone.

Could the euro really split up?

It’s certainly not impossible. In fact it’s more probable than at any time in its history. But most commentators still say it’s highly unlikely. Germany, for example, has gained enormously from being able to export to its neighbors in the one currency.

Jan Randolph from IHS Global Insight says: “The eurozone project is in Germany’s long-term interests and they will do their utmost — and I think the French will do their utmost — to maintain the euro.”

Nevertheless, he says, the eurozone faces some very hard choices. Either the southern members like Greece, Spain, Italy, become more like Germany or some of them pull out of the euro. This currency really is between a rock and a hard place. I mean, the Greeks are not going to become more cautious or as prudent as the Germans. Greece isn’t Germany, that’s why it’s called Greece. So it could mean some countries pulling out, and that could be very messy.

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