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Wednesday, November 30, 2011

Euro Hubris Pricked

The days of optimism and hubris about the Euro are long gone.

Wolfgang Schauble, Germany's finance minister has admitted that Eurozone finance ministers, who are meeting in Brussels, cannot agree on the terms of the European Financial Stability Facility (EFSF).

He went on to tell Handelsblatt that plans for the EFSF were too “intricate and complex” for investors to understand.

Based on my experience of finance and fraud, when someone says that something is too complex for people to understand it generally means that either:

1 They don't understand it themselves, or

2 They are committing fraud

The dithering and failure of Eurozone "leaders" to resolve the Euro crisis has destroyed confidence in the euro experiment. As such, multinationals around the the world are now making contingency plans for the breakup of the Eurozone.

Andrew Morgan, President of Diageo, is quoted in the FT:

We’ve started thinking what [a break-up] might look like.

If you get some much bigger kind of ... change around the euro, then we are into a different situation altogether. With countries coming out of the euro, you’ve got massive devaluation that makes imported brands very, very expensive.”

The Eurozone has signed its own death warrant.

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