Buzz Predicts no Calamity for the Euro

Bangkok, Thailand. June 16, 2012. Although my record as an oracle is not a good one, it doesn't stop me from making predictions. Why should it? Thank of all those predicting the end of the world at a date certain, only to live on to predict another date for the end of time. Europe is a more difficult case because it has been "in crisis" for so long that the meaning of the term itself has changed from that of a sudden event, to a perpetual state of affairs that has no resolution in sight. So, when commentators talk about "the crisis," what they are really talking about is the existence vel non of a calamity. In this context, the immediate calamity being contemplated is Greece abandoning the euro either voluntarily or by action of the euro zone's powers, or by a collapse of the European monetary union, the euro. Here's my prediction: Greece will remain in the common currency and the euro itself will not collapse in the foreseeable future.
 
Greece's election on Sunday is seen as a pivotal point and its importance is great, but not necessarily determinative. While no one can know what Greek voters will decided for their parliamentary leadership because it's too close to call, the two major parties vying to lead a new government say they want to stay in the euro. Furthermore, repeated public opinion polls show that between 70%-80% of Greeks do not want to abandon the common currency. Even those who think that Greece will be better off with the drachma, understand that a precipitous, messy change from the euro to the drachma, will produce economic chaos and societal upheaval that is unimaginable. Regardless of the identity of the winning party in Sunday's election, neither will take Greece out of the euro, and both will try to renegotiate the existing bailout deal with Greece's lenders.
 
Okay, what about the other side, the ECB, the EC, the IMF, and Angela Merkel? There is evidence that these lenders, with Germany calling the shots, have come to realize that Greece cannot adhere to the deal as written, regardless of Greece's austerity measures, the lenders' repeated pronouncements that there will be no renogiations to the contrary notwithstanding. While the deal may not be "renegotiated" per se, certain parts of it may be "postponed," "delayed," "refined," and regardless, Germany and the other euro entities will continue to trickle enough money into Greece to keep the government functioning within the euro zone. That's a simple matter of economics: it's far cheaper to keep Greece alive within the currency union, than it is to force it out. While Angela Merkel does not publically acknowledge how beneficial the euro has been to her country's economy, mainly by keeping its currency low at the expense of the weaker members, she and her advisers know a Germany with its own deutschmark back, will not be nearly the economic success story it now is, and the cost of a monetary union breakup will be enormous, especially for Germany's banks. Germany will not force Greece out of the common currency, and Angela Merkel does not want to go down in history as the German leader who presided over the failure of the European project.
 
So, where does that leave us after Sunday's vote in Greece? Answer: pretty much where we are now, with a continuing crisis in Europe (the new normal), but no calamity in sight. In the meantime, I'm planning a trip to Europe within the next year and I'm planning to buy euros now to spend on the trip. I'm not worried about not finding euro zone countries in which to spend it. And after that;---hold on to your seats until I have another predication to make about events to come, which I'm sure to put forward whether I'm right about the euro or not.