The question is no longer taboo, it even became very fashionable in the media because it sells newspapers and mounts the hearing. Not surprising! The euro is easy to discredit because it is the fruit of technical compromise and national interests. However, the arguments we hear in the media are fragile or even misleading. Epluchons both of these arguments.
– Firstly, a return to the franc would put us away from financial speculation. Instead, it would make us even more vulnerable.
When the financial markets believe that the value of a currency is not realistic, they speculate downward. For example, before the euro since 1979, our currencies were fixed to each other in an exchange rate mechanism: in other words, whatever the individual economic uncertainties, all currencies varied concert. But in 1992, a series of speculative attacks by George Soros causes a violent devaluation of the pound sterling (15% in a few days). Indeed, Britain has just experienced the bursting of a housing bubble (like yours, a housing bubble …), the high-interest rates inhibit the activity and the country is in recession. Financial markets believe that sterling is overvalued and bet on its devaluation. The problem is that this kind of attack, when it is conducted with sufficient ammunition, is self-fulfilling. But Soros and his cronies – JP Morgan, Bank of America, Jones Investment … – sell for 10 billion pounds short, enough to undo the Bank of England. The pound answers. Soros can then quietly repay its creditors in pounds sterling, but with a devalued pound against the dollar. In short, George Soros earns over a billion dollars.
The same causes produce the same effects. To limit the volatility of our currency (not good for importers and exporters), we will anchor ourselves to other European currencies, as between 1979 and 1999. But the return to national currencies will make them even more vulnerable to the judgment of financial markets. Given the financial strength gained by the banking giants for 20 years, no national central bank will resist a coordinated attack. Recall that the assets of one bank such as Deutsche Bank more than 10 times the GDP of Portugal or Greece. Some advocates of a euro exit advocate capital controls. Back to before 1986, pay a fee for each transfer between companies in the area? … The problem is that speculators, who are those that are with capital controls, have increasingly sophisticated tools that allow them to circumvent these controls while the real economy would suffer.
– Secondly, the return to the franc we read that would be no problem because the debt issued under the national law of contract will be re-denominated automatically new national currency, according to the newly fixed parity. Maybe true for public debt, not to private debt!
If exit from the euro, we expect a devaluation of 10 to 20% of the franc, which will strengthen our competitiveness. But then all the debts of households and vis-à-vis companies from foreign creditors increased by the same amount … For example, if my bank who contracted a loan with Britain asks me to pay 20% more my real estate loan each month, how to cope if my salary has not changed? No way, I do not pay! Is it anecdotal? How many private debts were contracted abroad? The amount owed by households and French companies abroad is 2370 billion euros, that is to say … 1.5 times the French GDP. A trifle.
Also, to prevent a general bankruptcy, should the authorities in each country agree on a non-market exchange rate that allows that contracts are honored (as was the case in Argentina in 2002). So you should choose rules that are necessarily in favor of some and the detriment of others. Who favors? foreign creditors or debtors French? Each country, its scale will ask the same question. In other words, an exit from the euro will necessarily involve a redistribution of cards … How to avoid social disorder at the time of arbitration? Which government will be able to impose the reimbursement rules without undergoing a vast uprising of aggrieved categories? How to deal with conflicts between states in the area, on the gross debt? The recent case of Cyprus and the Argentine case reveal social tensions at the time of such crisis.
Do not panic … just a few numbers and reasoning to understand that leaving the euro is not so neutral that wants to make us believe in the context of the European elections. Even if it sells … The solution that we advocate is expressed there. It was signed by both of us on this blog, and also by Thomas Piketty and Rosanvallon. No partridges last year … So, if you agree, sign!