A European Currency Meltdown?

The potential rout in national economies that is threatening to spread across Europe like a bush fire seems to be gathering pace as hungry and injured Hedge funds look on while licking their chops at the huge profits such a cascading currency crisis presents…and Iceland was just round one.

The former Soviet bloc is in the epicentre of the current round of frightening developments swirling around Europe…and Euro sceptics are rejoicing as the currency pegs that hold the now fragile Economies of Europe together look like being ripped out like tent pins in a hurricane.

After the rejection of the Lisbon treaty in Ireland, the EU ruling elite can ill afford a monetary strain on top of the political strain that has recently thrown the direction, if not the very existence of the EU, into doubt.  Should a serious test of the EU monetary system find Brussels wanting, their grand plans will lie in tatters and could force European countries out of the EU as resurgent nationalism destroys the great European unification process…the Grand Plan. Make no mistake; there is a very real danger here that that is precisely what will happen.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

European banks are heavily exposed to the upheavals in the emerging blocs on the fringe of Europe in Latin America and Asia. Ukraine, Serbia and Hungary are all at the IMFs door, cap in hand. Economies like Austria and Switzerland could follow as their liabilities to the emerging markets are over 50% of GDP.

Hans Redeker, currency chief at BNP Paribas, says there is an imminent danger that East Europe’s currency pegs will be smashed unless the EU authorities wake up to the full gravity of the threat, and that in turn will trigger a dangerous crisis for EMU itself.

“The system is paralysed, and it is starting to look like Black Wednesday in 1992. I’m afraid this is going to have a very deflationary effect on the economy of Western Europe. It is almost guaranteed that euro land money supply is about to implode,” he said.

Look out below.

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Tags: Currency Crisis, Euro, Europe, European Currency, Global Credit Crisis, Lisbon Treaty, Monetary System