To put us in perspective, it is worth re-reading the article entitled «The secret Franco-German Super-State project«, in which we highlight the radical change of plans that the leaders at the heart of the Union (sic) have planned for those states that cannot keep up with the economic pace of the more advanced EU countries (read periphery and centre). You can also read the devastating document This was the original text drafted by the French and German foreign ministers last June, in reaction to Brexit, which was leaked very discreetly to some second-tier media outlets.
Well, this week the German foreign minister is at it again, making comments that are no longer being leaked discreetly to second-rate media outlets but are appearing in Bloomberg itself. In this article entitled «Merkel’s Foreign Minister says the EU cannot force unity after Brexit.» you’ll come across comments such as this one: “We want a ‘flexible union’ that tackles the big issues effectively, but does not require each Member State to take every new step together«... and other warnings along the same lines that EU countries wishing to take «certain initiatives» jointly do not necessarily have to be followed by the other countries, nor are the latter bound to be affected by them.”.
Merkel’s government is saying publicly that from now on the focus must be on practical issues, such as boosting competitiveness and employment, and moving away from grandiose visions of an EU that have proved unworkable. German Finance Minister Wolfgang Schäuble himself dropped the bombshell at the start of the summer by saying that following the result of the Brexit referendum, EU countries «should move forward pragmatically». He also said that at certain times EU countries should to move forward at different paces in groups of like-minded states. Obviously, this refers to different economic growth rates, with all that this entails in terms of monetary policy.
This is the first crucial question investors should ask themselves: «Is it possible for the EU to have two groups of countries moving at different speeds whilst sharing the same currency and monetary policy? Obviously, the answer is NO. And the second crucial question we need to ask ourselves is: Are my financial and property investments prepared for a currency collapse? No doubt most of you are now faced with a whole host of questions (which you thought you’d never have to ask yourselves with the single currency), such as how the EU would go about separating one euro from another, with the resulting devaluation or revaluation, how long the resulting capital controls would last, which assets and account holders would be affected, and so on and so forth. Welcome to the real world.
The fact is that the differing paces being set by Germany and France present an easily avoidable problem for investors whose residence and assets are located in the core zone. By default, their assets will be valued in the strong euro due to their place of residence and location, and they need only avoid investments in foreign assets and ill-advised locations that will be affected by devaluation, such as the stock market or property in Spain, Portugal, etc. However, for those of us living in the south, avoiding devaluation will be a much more complex task and will require careful planning. And not just proper planning of the investments themselves, but also of the vehicles and the ownership of the assets. Because financial globalisation and expert advice can – indeed must – ensure that our assets not only avoid being adversely affected but also capitalise on this split in the EU into two speeds as a once-in-a-lifetime opportunity.
As for the clueless/misinformed majority who are going to be caught out by the Euro B bull, they’ll be left with the same consolation as those who suffered the economic stagnation of half a century ago under the beloved peseta: If you don’t travel or buy anything imported, you’ll only notice your massive loss of purchasing power when you pay your energy bill (always in expensive currency). And with a bit of luck, you might benefit from the growth generated by the inflow of Euro A and other currencies, via exports, tourism, etc., in true Berlanga style, but this time with a «Welcome, Ms Merke»l".
Certainly, the Germans and the French are finally seeing all too clearly where the EU is heading. With that in mind, the sailors—however sceptical they may be—have been warned.