Is it true that Europe is collapsing?

End of the euro: that would be the consequences in Europe

Just two years ago, the breakup of the euro zone seemed a realistic option. Grexit, i.e. the departure of Greece, was expected everywhere, and Anglo-Saxon investors in particular speculated that afterwards the euro as a whole would disappear in the storm of history - in vain.

The best example is John Paulson, who once made billions by betting on the collapse of the US housing bubble. On the other hand, he lost a lot of money with his euro bets because it still exists. And lately its existence did not seem to be in question even among finance professionals.

But now suddenly another American financial institution, Bank of America, comes out with a study in which it addresses the question of what Europe's monetary world would look like after the euro collapsed. "The day after the Euro" is the title of the elaboration, the author of which Athanasios Vamvakidis is also Greek of all people.

D-Mark would have to appreciate against the old euro

The central point for Vamvakidis is the question of how the national successor currencies of the euro would develop, how much they would appreciate or depreciate. To calculate this, he used the so-called CGER method of the International Monetary Fund, which is primarily based on the imbalances between individual economies. The result, unsurprisingly, is that the new D-Mark would have to appreciate the most against the old Euro, namely around 15 percent.

But it would very likely increase in value even more. "The new German currency could overshoot significantly in practice," writes Vamvakidis. On the other hand, a new French franc would have to devalue around five percent, Spain and Greece's currencies as much as 7.5 percent. And here, too, the following applies: "The currency development in the periphery is also likely to overshoot, so that these currencies will depreciate far more sharply in the short term."