What Would the Effect Be if the Euro Disappeared?

Posted by Allison on 14 October 2011, 14:05

Whatever newspaper you read and whatever website you visit, you’re never far away from news about the current state of affairs in Europe. Never has the Euro been closer to self destruction than it is now, and it would be crazy to write this column – especially this month – without making any mention of it at all.

Some people have warned that the single currency is running out of time to secure its survival. But what would happen if it did suddenly disappear and cease to exist? A lot of people in the UK are glad that they still have their British pound to hold onto. If we had gone into the Euro we would have this currency right now, and we could have ended up wondering whether we would have it for much longer. But just because we don’t have the currency it doesn’t mean that we wouldn’t be affected if (or when) it did go under.

So what would the effects be?

Put simply it is very hard to tell. It would depend partly on which countries left the Euro first. This could be one outcome, with countries leaving left, right and centre. Alternatively the currency could just collapse, leaving all the member countries without a working currency to use. We might think we’re better off out of it – and we are in many ways – but we are also hesitant about the idea of doing business with countries that could be using a soon to disappear currency.

This is where we would see the biggest effects. We would also have the possibility of banks coming into problems fuelled by the European debt crisis. If one or more banks fall as a result of the problems circulating around the Eurozone at the moment, we could be affected more than we might think.

In the end the only way we will find out what the effects could be is if this situation comes to pass. The Euro is so unstable at the moment that we cannot tell if it will still be here in a year from now, or whether it will be gone in just a few weeks.