Tags: Neil | euro | eurozone | Cyprus

British Journalist Andrew Neil to Moneynews: Euro ‘Will Survive’ Europe’s Financial Crisis

By    |   Tuesday, 02 April 2013 07:23 AM

While the financial meltdown in Cyprus raises Europe’s debt crisis to the fore once more, the euro isn’t going anywhere, says Andrew Neil, a former editor at The Economist who now hosts political shows on BBC television.

“The euro will survive,” he tells Newsmax TV in an exclusive interview. “The euro’s not the problem. People confuse this. The problem is of the eurozone, not of the euro itself. … Throughout this eurozone crisis, the euro has remained strong, much stronger against the dollar now than it was only a couple of years ago.”

Neil is slightly off on that one, since although there has been some fluctuation, the euro has dropped 9 percent against the dollar over the past two years.

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Nonetheless, the reason for the euro’s strength is that “the markets know that at the end of the day, the Germans are there to back up the euro,” he says. “So the euro survives as the second currency of the world after the dollar.”

The eurozone itself is another issue, Neil notes. “The problem with the eurozone is that it brought in a lot of countries that frankly should never have been allowed in — Greece for sure, Cyprus for sure, probably Portugal as well, probably Spain and maybe even Italy.’

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The eurozone could have worked as a cohesive monetary group with Germany, the Benelux countries, probably France and Scandinavia.

“But to bring in the Italians, Spaniards, the Greeks was crazy. And so the danger is not the euro, but that the eurozone begins to lose its weakened members, and I would not rule out Cyprus being the first of those.”

The Cyprus economy is headed down the tank, Neil maintains. “Their business model is shot to hell. Nobody’s going to keep their money there anymore, the banking center has gone and they have nothing else to offer.”

Result: Cyprus could exit the eurozone and the euro, sparking other departures as well, he suggests.

Meanwhile, the losses imposed on bank depositors in Cyprus represent a warning shot for the rest of Europe too. “It’s a precedent, it could happen again,” he notes.

“The worry in Europe now is that to bail out the banks, it looks like there’s a hierarchy of who you go after. So you go for the shareholders first, then you go for the bondholders and now the new development in Cyprus is you go for people who have deposits with the banks.”

Europeans are understandably terrified. “People are wondering, if a government can come and just raid my bank account, why should I keep money in the bank?” he states.

“At the very least I should move money to banks that are much more solvent. It would be a flight to quality. So if you look at the situation in Italy or in Spain and even in Ireland, then people are definitely worried that if they can do it in Cyprus, they can do it elsewhere.”

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While the financial meltdown in Cyprus raises Europe’s debt crisis to the fore once more, the euro isn’t going anywhere, says Andrew Neil, a former editor at The Economist who now hosts political shows on BBC television.
Neil,euro,eurozone,Cyprus
1974
2013-23-02
Tuesday, 02 April 2013 07:23 AM
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