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An interesting thought experiment, and perhaps even a good negotiating ploy challenging the Euro to reform its structures or face a credible threat of a Seuro unless there is significant reform of the Euro.

From an Irish point of view, the Seuro would probably not be seen as attractive. The main attractions of the Euro were:

  1. Access to core Euro markets making it very attractive for mainly US multinationals to locate here without exchange risk.

  2. Much lower inflation and interest rates a la Deutschmark

  3. Much greater exchange rate stability and reduced exchange risks generally. (Remember, it is possible for a medium sized shadow bank, hedge fund or venture capitalist to totally game a small currency like the punt - and almost impossible for an Irish central bank to counter such relatively large scale manipulation).

  4. Greater integration with "strong" economies like Germany and reduced dependency on the UK.

  5. A mistrust of the ability of the Irish Government to manage an Irish currency independently and in the interests of the Irish people as opposed to influential financial sector interests. Rightly or wrongly, people were more inclined to trust Germany not to debase their currency.

Ireland has very little trade with (say) Greece. Whatever optimal currency area advantages that might apply with Germany would apply much less with Greece. A more likely scenario in the event of a Euro collapse would be for Ireland to seek some kind of semi-formal link to Sterling or the dollar. I'm not sure small independent currencies are possible any more for small open economies many times smaller than the big financial corporations.

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by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Sep 23rd, 2013 at 05:24:16 PM EST

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