Once a country has joined the Euro there is no reverting back to its old currency. This is the second reason I gave as to why the Euro experiment is a bad idea. In 2010 Greece is a good example of a country that may wish to leave the Euro, or one where other member states may wish they could kick it out! But the Euro hasn’t been designed with an emergency exit – there is no way to get out once you’ve signed up.
Now you may say the Greek government could simply start to print Drachmas and declare the Euro as no longer legal tender. The problem is all the gold and currency reserves are held in Frankfurt and controlled by the European Central bank. The Greek government would need to “ask” the ECB for its fair share. But what is a fair share for a country that is basically bankrupt (hint: it’s close to zero).
This means there would be nothing backing the new Drachma currency. The tension created by no exit path is tremendous and could ultimately lead to the explosion of the Euro. The alternative is for wealthier countries such as Germany and France to foot the bill for Greece’s miss-management. A measure that is certainly unpopular and possibly illegal. I would certainly not recommend investing any money in the Euro currency as its value will be hammered as it negotiates though these choppy waters ahead.
I predict less than parity to the US dollar within two years i.e. €1 = $0.9.