I’d be interested to hear about how people think a European country dropping out of the Euro would come about?
Would it be that we’d wake up one morning, and it would be fait accompli?
No. That kind of action has only happened one time in the history of the EU - when the Irish government decided overnight that the sovereign and state would take full responsibility for the debts of its indigenous banks. But you have to realise the political context that happened in - essentially the interests of the effectively ruling Irish elite (top ‘layers’ of that elite) were threatened in a particular manner, and the pathological business and political culture of the time fostered the necessary elements of denial and superiority complex that enabled dangerous bilateral action to be taken that worked against the interests of practically everybody else.
But I don’t see that happening with Cyprus, Greece or Portugal, for the reason that* the incomes of the effectively ruling elites or classes there are much more valuable in Euro terms. * (not to mention source of funding of much of those incomes)
Certainly, the economy may experience more and more difficulties, and the middle classes experience greater and greater distress, giving rise to other economic and political impetuses. But what happens in that case happens much more slowly. You will not have something like what happened in Ireland happen.
What happens in this case, is that the political and economic misery becomes more and more strident - gradually, over time, or even in ‘waves’. But the time factor allows these waves to be “assuaged” just enough to damp it down enough to allow things carry on. Through transfer of money essentially, in the form of new bail-outs, loans, interest rate reductions, debt holidays, or other conferments.
Why? Because the Euro is considered too important. It is held to be ‘strong’ money. It is held capable of being on a par with the mighty US dollar. It fosters (and has already fostered) much strengthened economic and trading ties between EU countries. A key enabler of wonderful wonderful free-marketism. Of course, it was also created to foster European unity and put an end to the wars that have plagued Europe in its history. There is still massive faith in the Euro as a currency in spite of its present short-comings (and even in spite of the gold-bug prophecies).
As I said in previous post on this thread, you can be sure that everything valuable to Europeans will be readily sacrificed in the attempt to save the Euro, over time. Even if that attempt is to be a vain one, bound to end up in failure (although that is far from a foregone conclusion at this stage).
I can readily see how presently, money kept in a German bank is worth more than it kept in a Cypriot bank. But that is why Cyprus is presently in quarantine. And it will remain so until such time as the perception of risk associated with Cypriot based investments and holdings is effectively managed.
The key political fact is any class who currently receives an income stream in Euro, would much prefer to keep it that way, even if in the process, their whole economy is destroyed. They will not see their broader interest in that regard. Short term-ism is the reality.
Certainly, there is a growing class - the “keen to retire class” who see a means to better fund their retirements through driving down costs in their own countries, while managing to keep a hold on a strong currency for themselves, whether Euro or gold or German bonds etc.
But this class though rising, is yet far far down the pecking order.
As long as people with incomes are in the majority, these countries will not leave the Euro. On a numbers basis, if unemployment started getting near 50%, then there might be trouble, depending on how the other 50% with incomes could hold onto power.
Worst case scenario, we have another 5-10 years to go before you have a country with a presently well paid public sector, and with relatively high levels of rentier based income streams, dropping out of the Euro.