Forex Figures

Considering that Kim Kardashian elected to end her highly publicized (and ridiculously expensive) marriage after only 72 days and that Carmen Electra and Dennis Rodman’s blessed union lasted under 300 hours, it shouldn’t be entirely surprising that the previously idyllic European Union is now being called into question, with strong rumblings of a Greek exit from the union (already dubbed a ‘Grexit’ by media outlets worldwide). The EU is only around 12 years old, significantly longer than most celebrity marriages, but still in its infancy as far as political unions are concerned. Although nothing has been confirmed yet, analysts can’t help but wonder what a Grexit would mean, both for European countries and for global markets. The true ramifications of such a divorce may not really be known until a Grexit is confirmed, but there are some certainties that we can expect in advance of such an event.

How a Grexit Would Effect Greece

One of the first things that Greece would be required to do if the country withdraws from the EU is to create a new currency with which it can pay public expenses, public sector salaries and social security obligations. The problems with this requirement are multiple, including the fact that such a currency will undoubtedly be worth a fraction of the value of the Euro, the nation’s current currency. According to the IMF, a new Greek currency could be valued at up to 20% less than the Euro’s face value.

This is, of course, to say nothing of the logistical nightmare of having to print and distribute a new currency and to create a new set of laws governing how the new money would work. By some estimates, printing new money takes around 4 months, which poses all sorts of other conundrums that analysts are petrified to consider. It also doesn’t speak of the fact that a new currency would wreak havoc on business growth and loan procurement for new businesses, which would stifle the already ravaged economy in devastating ways. Likewise, there would be a need to reissue all of the country’s mortgages and loans and to prevent Greek citizens from attempting to withdraw all of their funds in Euros before a new, devalued Greek currency is issued. Looking at these issues, it seems impossible or ridiculous to even consider a Grexit…but unfortunately, such an event may be a requirement rather than a choice if the country cannot commit to the austerity demands imposed by the other member nations.

A Shakeup for the Whole EU

A Greek exit from the EMU would also have dramatic effects on Greek’s lenders, all of whom would be holding debt that is essentially worthless. For this reason alone, many EU leaders are fighting to keep Greece in the union, despite the difficulties. Jean-Claude Juncker, the prime minister of Luxembourg and the current president of the EU’s finance ministers mentioned this week that “… nobody was mentioning an exit of Greece from the euro area. I am strongly against. We are 17 member-states being co-owners of our common currency. I don’t envisage, not even for one second, Greece leaving the euro area. This is nonsense, this is propaganda. We have to respect Greek democracy.” Still, Jose Manuel Barroso, the president of the European Commission, had a different comment, saying that “If a member of a club does not respect the rules, its better that it leaves the club—and this is true for any organization or institution or any project.”

Unless Greek President Karolos Papaoulias can build a government (which looks unlikely at this moment) before the scheduled bailout payment next month, it seems that the possibility of a Grexit remains within the scope of reality. In other words, we can expect to see continued selloffs and decreased confidence levels before we can identify the light at the end of the tunnel.

While most of the ASEAN nations have been dictatorships and or communist regimes for some time, they are starting to realize that they need to move into the world of the capitalist markets and are thus in the process of opening their stock markets and currency markets to the world.

Thus Cambodia for example just opened their very first stock exchange, which, as of this writing is trading a single stock (the Phnom Penh Water Authority). The Ho Chi Minh Stock Exchange was opened a few years earlier in the year 2000 and already sports more than 300 companies traded on the exchange. In Laos, the Laos Security Exchange is also a recent creation with just two stocks being traded on their market.

All Trying to Attract Foreign Investment

The key thing to remember however is that all of these countries along with the other ASEAN nations (and especially Singapore, which has always attracted foreign investment) are eager to attract foreign investment and are thus ripe investment opportunities for those who wish to take their chances in exchange for potentially large rewards.

How to Invest

One of the best ways to make investments in these countries is to look into working within their stock markets. Since almost all ASEAN nations now have a stock exchange (the exceptions are Brunei and Myanmar, though a Burma stock exchange is currently being planned and there are murmurs about creating a stock exchange in Brunei as well) it’s possible to simply purchase stocks in the various countries as an investment.

Be sure to track the various companies just as you would with more traditional investments in more established countries. It may also be a good idea to hold off on investments on the newest stock exchanges until they have matured somewhat, unless you can afford to lose the money on your bets.

Forex Markets

Most of these countries have limited Forex markets available for investing opportunities, though it is possible to purchase currencies in some of these countries as well. The Lao Kip is a good currency for going short since the currency has been steadily dropping in value versus the US dollar over the past few years. The Vietnamese Dong by comparison has been steadily rising in value when compared with the dollar. The Cambodian Riel has seen the most fluctuation of all of these currencies, with the price jumping up down against the dollar. In all cases remember that as currencies of emerging markets these are likely to be much more volatile than purchasing currencies from more established states.

Bottom Line

The bottom line is that there are investment opportunities which are a off the beaten path that are worth looking into, especially if you have the stomach for slightly riskier investment opportunities and a good handle on the Forex world in general.

Is the European experiment a failure? It’s too soon to tell, but I believe that much of the doom and gloom crowd is simply misinformed about what’s going on in the European Union. Of course, had I posed this question around three or four years ago, people would have laughed at me for my naiveté. What do you mean? They would have asked – the EU is a great success story and the euro zone is chugging along beautifully.

The Ongoing Euro Crisis

The big question of course is the still ongoing Euro crisis. While the past week has not seen any major changes in the status quo, meaning that things haven’t gotten worse, this also means that things haven’t gotten better. Bottom line, the euro is still on shaky ground since the crisis is far from over. Many, many members of the Eurozone are finding it harder to borrow, with Spain still reeling from high borrowing costs and depression level unemployment rates.

Speaking of Spain

Speaking of Spain, they have a whopping 24% unemployment rate right now. This kind of rate is not sustainable in the long term and will eventually lead to civil unrest. This has already begun, with street protests becoming a regular occurrence, however one can expect things to get even worse as times get tougher for the average Spaniard.

The Brain Drain

Another unforeseen problem which the European Union is having is a brain drain, specifically from southern Europe to northern Europe – as jobs have become scarce on the Iberian Peninsula as well as in place like Greece and Italy, more people are making their way north to the wealthier countries of the EU. Places like Germany, France and the Netherlands are seeing their populations grow as those with skills and no jobs look elsewhere for a brighter future.

On the Good Side

The good side however is that Europe still has room for growth. I believe that what we are witnessing is no different than the early days of the American republic. In those days, people tended to think of themselves not as Americans but as Mainers, New Yorkers, Virginians and Marylanders (to name just a few of the original states).

It took a number of years before people stopped thinking of themselves as citizens of the individual colonies and instead began to see themselves as Americans who happened to have been born in one state or another. I believe that we are witnessing the early stages of this in Europe as people begin to realize that the EU means more than just open borders and a common currency. It means being a citizen of the European Union.

The Elephant in the Room

The one big problem which could keep Europe from becoming the melting pot that is America (well, two big problems – the first is the language barrier across different countries, though there are ways around this issue) is that Europe as a whole needs to decide for itself what it will be. Is it is going to be a free trade zone or is it going to be something more akin to the United States of Europe?

If the former, then the EU as we currently know it is likely doomed since a free trade zone doesn’t need or even benefit from a common currency and common laws. However, I believe that Europe’s politicians will ultimately choose the more practical alternative and find ways to work together more closely so that they can become ever more closely integrated, thus avoiding the potential for a divided Europe slipping into war as it did following the Great Depression in the 1930s.

The European elections in Greece and France have had even the most dedicated technical traders glued to their screens, especially after the surprising victory of Francois Hollande over incumbent Nicolas Sarkozy in yesterday’s first round of France’s presidential race.  The second round of French elections is just around the corner on May 6^th, followed by the German regional contests, the Greek parliamentary election and an Irish referendum at the end of the month.  At issue in each country is not just what party politics will prove triumphant, but which candidate or party’s view for the future will help mold the struggling economies throughout the region.  Perhaps equally important is what the voters see for the future of the Eurozone – do they wish to remain cohesive, or to change the system so dramatically that the glorious region of old will be forever changed?

Of primary consideration in Greece is whether the austerity plan should be carried out as it is now, or whether dramatic changes are in order.  The issues in France are similar, with voters at this point favoring Hollande’s commitment to promoting growth while relying less on austerity measures.  If his alternative approach does succeed, however, voters may rejoice at the national coup, but the relations between France and Germany, built over the past few years by Sarkozy and Germany Chancellor Merkel will likely suffer significant repercussions.  In that case, Merkel’s own chances of reelection next year may be called into question.

On the whole, data out of the EU is glum – the EU statistics agency announced that 17 of its members cut their deficits to 4.1 percent of the economic output in 2011, down from 6.2 percent in 2012.  But this good news was offset by the fact that the overall debt in the region rose to 87.2 percent of the GDP, up significantly from 85.3 percent.

Though it’s too early to predict the outcomes of the elections or the status of the unified Europe, most analysts agree that the dollar will likely strengthen in the coming days and weeks, especially on the heels of such disruptive news from the Eurozone.  What happens  after that remains to be seen…

Once upon a time, we talked about the land of the rising sun (i.e. Japan). Today however, the story is definitely all about the rising dollar. For the past five months, the US dollar has seen some good growth and this could mean that a turnaround in the world economy is afoot. Here’s what you need to know:

The Dollar Is Still Important

For all that there has been talk lately about the dollar becoming something akin to the British Pound (i.e. a former reserve currency), the fact is that for the foreseeable future, the dollar will remain king of the jungle for the simple reason that the dollar doesn’t really have any replacement. The fact that it has been going up against most major currencies recently is in my humble opinion, further proof that the dollar will retain its position for the foreseeable future.

The Elections

And before anyone hits up the comment button and tells me that this may be in part due to buoyancy from the American elections, I’ve already thought of that. Yes, it’s possible that the elections are having some kind of an effect on the value of the dollar, though to be honest, I believe that the exact opposite of buoyancy should be occurring because of this.

As the Republican candidates vie for the nomination while President Obama tries to figure out how he’s going to fight off what is sure to be a formidable Republican effort to unseat him, the political infighting should be anything but a cause for buoyancy of the dollar.

The Iran Situation Is Also Having the Opposite Effect

With the constant back and forth about the price of oil and the Iran situation, one would imagine as well that the dollar would be taking a beating since the Americans are at the forefront of the international efforts to stop the Iranian bomb. However, in spite of increasing rhetoric on the part of the Israelis and the American pledge to support Israel in any decision she makes, the dollar is still rising and not falling.

So What’s Causing This?

I think that this is simply a case of what as kids we used to call “the willies.” The fact is that the global economy is still on somewhat shaky ground. Europe’s debt mess is still roiling the world, Iran is threatening to destabilize the price of oil and economists are still talking about the possibility of a double dip recession both in the United States and worldwide.

All of this has people rushing to find safe havens and like it or not, America is seen as a safe haven. This means that even with all the problems the American economy has been experiencing recently, it’s still the place to go for keeping your money safe.

How You Can Profit

I’d be looking at buying dollars in the short term though not the long term. I believe the dollar may yet falter once investors start seeing calmer news throughout the world, however for as long as the world’s economy remains on shaky ground and especially for as long as the Iranian situation remains volatile, I’d expect the dollar to keep rising. In any event, regardless of whether it rises or falls, I don’t see it being replaced as the world’s reserve currency any time soon.

While this blog is not about politics per se, the question of whether or not the European Union will manage to survive and thrive is very much on the mind of investors in the stock and Forex markets. That’s because Europe as a whole is an important market and is one which is necessary to maintaining a healthy world economy. However, the recent Euro shocks have meant that people are once again asking whether the experiment of an integrated Europe can survive. Here’s what you need to know:

The Articles of Confederation

In order to understand Europe, I like to look at American history. Technically, the 50 states are in fact separate countries bound together by a very strong central union. We don’t tend to think of them that way anymore because America has for so long been considered to be a single country. However, when the original 13 colonies broke away from Great Britain, they were all independent states and they banded together under the Articles of Confederation – a very loose connection of independent states which is quite similar to today’s European Union.

The articles of confederation were an abject failure however since the 13 newly independent states  squabbled amongst themselves and refused to compromise on many key issues (if this sounds like Europe today, you’ve hit the nail on the head). The solution was to create the United States Constitution, which was put into effect in 1789, some 13 years after the former colonies declared their independence. The big difference between the new constitution and the old articles of confederation was that decisions for the whole group didn’t require the consent of the whole group. In other words, if 11 states liked an idea but 2 of them didn’t, the idea would still become the law of the land.

New Rules Need to Be Created

In the wake of the recent Euro crisis, new mechanisms are being put into place to try to find ways to make decisions which don’t have to be unanimous amongst the 27 members of the EU. This started with the effort at an actual EU constitution a few years ago, but that idea was shot down when the people of Europe decided they weren’t interested in creating the USE (United States of Europe). However, the need to find ways to make things happen in a large and diverse grouping such the EU remains and as such, efforts are being made to change things.

The Current Rules

Now to be fair, the current rules do allow for non unanimous arrangements. In spite of the widely held notion that everything must be done by consensus, the fact is that nine or more members of the union can agree to arrange for a specific rule of their own making which the other members don’t have to agree to. The catch is that the rule must be put through a rigorous committee process where the entire bloc needs to try to find a way to agree on it and only afterwards can a rule be implemented for less than the full EU.

An Attempt to Get around the British

The new rules are being designed specifically in light of the fact that British have often played the spoiler in various negotiations, most recently with the efforts to prop up the Euro zone (where the 17 Eurozone members were forced to agree amongst themselves when Britain balked at a bailout). The thing that is new in the current effort is to try to write the new rules in a way which doesn’t allow Britain (or any other country for that matter) to benefit by staying out of the agreement. Specifically, new tax codes are being designed which will help to strengthen the Eurozone and which will at the same time allow Britain to stay out while also not giving them the same benefits they might get by simply being spoilers.

Will it Work?

That’s the question – we saw already that the Euro crisis exposed the fragile underbelly of the EU when richer northern countries balked at supporting the weaker southern nations. As things go forward, we can expect more such divisions to take place. Thus the need arises to find a way to make the union flexible enough to respond to crises while at the same time open enough to prevent the EU from being a European USA arises.

I’m not sure if ultimately they will be able to make this happen though. I’m reminded of what happened when America tried to make such a compromise back in the 1860s. The bloodiest war ever fought on American soil was the result – the Civil War. Hopefully Europe can avoid such problems. Then again, perhaps the effort at integration was just too much, too soon…

“The dear leader,” aka Kim Jong Il is dead and with him goes the tenuous stability that North Korea had existed under for the past few years. The North Korean dictator’s son, Kim Jung Un will likely succeed his father as leader of the rogue state, however questions remain as to whether or not this will mean more instability in an important part of the world or less instability. It’s too early to tell for certain, but here are some of the possible scenarios:

North Korea Opens to the West

While unlikely, the possibility everyone is hoping for is that the new “dear leader” will begin a kind of détente with the West, dismantle his country’s nuclear arsenal and begin trading with the entire world. If this happens, expect it to offer a small boost to the world economy with a very large boost to the North Korean economy. Those with money should be prepared to move in to seize new investment opportunities if the chance arises since North Korea could become an important new market and manufacturing hub.

Things Disintegrate Further

The second possibility is that things will disintegrate in the Korea peninsula with Un unable to hold onto power the way his father did. If this happens, we could be in for a very dangerous and bumpy ride indeed. Remember that North Korea is a cash starved nation with very little way of making any money in terms of hard currency. This means that if Un finds his grip slipping, he could decide to sell a thermonuclear device to the highest bidder (likely Al Qeada or some other international terrorist group, though Iran or even a struggling Bashar Assad are not impossible choices). If this happens, even if some city in the West doesn’t end up glowing in the dark (just the fact that a terrorist group was able to get their hands on a nuclear device would be enough), it will cause a further depression in world markets, causing the dollar and the Euro to fall further than they already have.

Things Stay Pretty Much the Same

Finally, there is a real possibility that Un will hold onto power in North Korea just as his father, Kim Jong Il did and will manage to learn how to weave around any popular discontent in his country. If this happens, nothing much is likely to change except that we’ll have a younger face to look at as the face of state terror, but life will go on as we know it.

What Has Happened So Far

To date, the dollar was boosted slightly by news of the death of Kim Jong Il as investors feared the uncertainty that was sure to reign in the days and weeks ahead. The Euro however remained largely unaffected by the news, though the recent plan by the European Central Bank to act something like the American Federal Reserve (i.e. the lender of last resort) did help stabilize the Euro zone somewhat.

How to Make Money Now

I’d advise looking at shorting some stocks in the South Korean market in the relative short term. Until things shake out over the next few weeks or months, things are likely to be uncertain. The South Korean Won may also be a good bet for shorting since it has already lost a small amount of value on the news of the death of Kim Jong Il. Again however, these benefits are likely to be temporary unless Un is unable to take the reigns of power effectively in North Korea.

Is anyone really surprised that the Eurozone is still facing problems? Yes, the 17 nations who use the Euro agreed last week to in essence do what they had originally agreed to do when the Euro was first created – live within their means. However, for all that they all pledged to do it before and then pledged to do it again in the most recent round of talks, it’s not the least bit surprising that investors are having trouble taking them at their word. Here’s what you need to need to know:

The New Agreement

In essence, the new Eurozone agreement was a repeat of the original Maastricht treaty requirements (with a few tweaks) which said that Eurozone members would be expected to follow strict guidelines when it came to debt, including a cap of 60% of GDP on national debt. This agreement became more of a suggestion however when tough times loomed and most of the Euro zone members broke with the initial agreement.

The new Eurozone agreement in essence requires that the members who use the Euro recommit to similar rules to tighten their borrowing. In theory at least, it requires anchoring the rules in legislation, though whether that will actually happen remains to be seen. Moreover, the rules will apply currently only to members who use the Euro or who plan to join the Eurozone. The leaders of the European Union had sought to require all 27 members of the EU to sign on, but Great Britain balked at the idea and so they had to settle for nations which use the Euro or plan to use the Euro.

The Problem with the New Agreement

The problems with the new agreement are multipronged. First and foremost, it doesn’t go as far as investors and analysts had hoped it would go. The call from most financial quarters has been for the Eurozone to adopt something akin to the American Federal Reserve – a lender of last resort which would guarantee the solvency of all the banks in the Euro zone. The European Central Bank has been tapped to perform some of those functions, however they are still hampered by the arcane rules governing the EU (i.e. that all members need to agree for a new rule to be put into place).

In addition to this, there is the problem that this was all supposed to have already happened. Investors know that the original treaty had guaranteed similar restraints on national governments and that those restraints were quickly abandoned when the global economy started to go sour.

What You Can Do to Profit

In the face of all this, I’ll offer the same suggestion I’ve offered previously: consider buying debt in stronger Eurezone countries. I consider France and Italy to be prime candidates for making money without a great deal of risk. Even German debt is starting to look good as interest rates rise all over the continent in the face of continued uncertainty.

Those who can afford to wait and who have a little more stomach for risk may want to wait a few weeks and see how things shake out – the ratings organizations have been making noises about downgrading a number of EU nations and this could increase yields on bonds from those nations.

The Euro Won’t Die Completely

I’ll go out on a limb here though and say that I still believe that the Euro will not die completely. While a split is still a possibility and it certainly does look like smart money is shorting the Euro (as I write this, the Euro has fallen about 20% from its high against the dollar in July, 2008), I believe that we will see the Euro lasting for the foreseeable future (if for no other reason that the members of the Eurozone have more to lose by abandoning the common currency than by muddling through to save it). Bottom line, expect more turbulence in the Eurozone for the future, but expect the stronger economies to ultimately pull themselves out of the mire and remain with their heads above water.

The Arab Spring has been bearing its first fruits of late, with Tunisians and Moroccans electing what are being termed “moderate Islamists” and the Egyptians having gone to the polls as well to elect the Muslim Brotherhood while Syria slips into civil war.

Meanwhile, the American economy continues to teeter on the brink, with Congress’ super committee failing to come to an agreement on cutting spending. These two events combine to create what might be called a “perfect storm” which could see shocks happening to the world economy.

The 1971 Oil Shock

In order to understand how the advent of the Arab Spring may affect the world economy, we need to go way back in history to 1971. Back then, the United States was facing problems similar to those it is facing today; namely, a shaky economy, an unpopular war and the threat of rampant inflation.

In order to solve these problems, President Nixon decided to unilaterally pull the United States out of the Bretton Woods agreement, which had previously mean that the dollar was pegged to gold. From then on, the dollar became a fiat currency, worth something only because the United States government said it was worth something.

The result was that OPEC began pricing their product (namely oil) in gold in order to recoup the losses they incurred from Nixon’s allowing the dollar to float. This meant that the price of oil shot up, further depressing the world economy.

Oil Set to Rise Again

Today, I see oil set to rise again as the confidence in the US dollar combines with the continued shakiness in the Middle East and threatens to disrupt supplies. In essence, now that Syria is set to fall, I believe a domino effect may be set into motion where other Middle Eastern dictators and monarchs will begin to see their own fortunes flagging. This, combined with the fact that the American dollar is under siege right now means that a single conflagration could easily produce oil shocks which make the 1971 crisis look tame by comparison.

The Possible Sparks

The big issue of course is that there are currently so many possible sparks. There is of course the Iranian nuclear crisis, with Israel threatening to attack and the Americans talking about the possibility of joining in at least. There is also the chance that Syria’s unrest could spread to nearby Saudi Arabia, the world’s second largest oil producer, thus causing a steep drop in production.

All this is to say nothing of the fact that some oil producing nations have been making noises about the idea of pricing oil in Euros, which would cause a massive disruption to the world economy. In other words, we truly are teetering on the brink, with a single spark able to push the world economy over the edge.

Islamists May Try to “Punish” the United States

I’m not at all convinced that the democracy experiments spreading in the Middle East will last. While I certainly hope that they will and wish the peoples of the area the very best of luck, I fear that the democracies that have been created may become a sham in the style of the Iranian democracy, where the real power is held by unelected clerics.

This fact combined with the fact that the Islamists have never exactly been very big fans of the United States could mean that oil producing nations may well try to “punish” the United States by trying to again price oil in gold or possibly in Euros (again of course, all this depends on the Arab Spring spreading to major oil producers, which has not happened yet).

How You Can Profit

Given all these possible problems, I’m not convinced that the world economy is out of the woods (in spite of recent announcements from the European Central Bank which seem to be helping to defuse the Euro crisis) and I believe that someone may well blink before it’s all over.

This will mean that those who buy oil futures could potentially make some good money. I’m also suggesting the possibility of shorting the dollar. Given the combination of a possible Islamist push to remove the dollar as the world’s reserve currency and the chance for oil shocks from disruptions if the Arab Spring spreads to major oil producing countries, I’d say these are both good bets for those who can afford to take serious risks with their money.

The safe money will likely be in oil stocks though, as these are likely to go up no matter what happens, though the profits may not be as great here. Either way though, the Arab spring and the American economy are combing to place our world in what the Chinese like to call a curse of “interesting times.”

It seems each time I finish my column and it goes up here on the blog, something else happens – like the threat to the Euro from the latest reverberations cascading across the continent. Last week it was Italy who was in trouble and now there are rumblings that France could find itself in difficult times, leaving only Germany as a relatively unscathed nation in the Euro Zone.

Germany Won’t Be Unaffected Either

The thing is, Germany, for all that it has managed to weather the global recession better than most other countries is definitely not immune to threats to the Euro either. Remember that Germany has built their economy over the past few years on cheap trade with other countries in the Euro Zone and this means that the threat to the Euro would deeply affect them as well. In fact, if (and I still believe it’s a long shot) the Euro does disintegrate, it will have disastrous effects for the entire planet.

But What about Italy?

Last week, I mentioned that Italy is in a much stronger position than Greece was and that, in spite of their heavy debt load, they are more likely to be able to weather the storm better than Greece. I still believe this and here’s why: Italy simply is too big to fail.

Investors Won’t Let It Happen

This has nothing to do with the other Euro zone governments either (well, it has to do with them as well – see below. However, it also has to do with self interest of debt holders). It has to do with the most basic of economics: Italy owes trillions of Euros in debts. This means that were they to go bankrupt and fail to pay those debts, they wouldn’t just take the Euro zone with them, but they would also take all of their investors with them.

I firmly believe that while a handful of investors may try to do something stupid, like trying to pull their money when the money isn’t there, most investors in Italian debt will realize they simply have no choice but to keep rolling over the debt and taking paper profits. Anything else means that they’ll lose even more than they would if they didn’t keep extending the debts out.

The Need to Reform

All this is to say nothing of the fact that the government of Europe all know that they must engage in real reform, namely that they need a central monetary policy is going to be difficult to achieve. And I do believe it will be achieved because enlightened self interest will make the nations of the Euro zone realize that they have no choice but to continue to be bound together. The fact is that while they might potentially shake off a return of the Drachma, a return of the Lira or even worse the Franc or the Deutsche Mark would be a disaster which would simply mean that all the nations of the zone will suffer.