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Fears of a Euro Demise: The Disastrous Consequences of a Return to the Deutsche Mark

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Europe is discussing the horror scenario of a break-up of the euro zone. At present, that still seems unlikely, but experts are alarmed. A comeback of national currencies would be fatal -- especially for Germany.

The cherisched deutsche mark. Zoom
dpa

The cherisched deutsche mark.

The deutsche mark is still around. Even almost nine full years after the introduction of euro notes and coins, German households still have an estimated 13 billion deutsche marks -- stashed in hiding places, in collections or under grandma's mattress. And, if opinion polls are to be believed, almost 50 percent of Germans would like to see the currency reintroduced as the country's official means of payment.

In fact, pollsters at the EU's Eurobarometer have determined that: "For many Germans, the deutsche mark was the symbol of economic security, stability and prosperity." Those are attributes that euroskeptics will never be able to associate Europe's single currency with.

From one perspective, they might be right. Hasn't the financial crisis in Europe gotten drastically worse in recent weeks? First it was Greece, and now Ireland too has had to draw on the €750 billion ($993 billion) euro rescue fund set up this year to prevent the euro zone from breaking apart.

A number of other euro-zone countries may be about to share the same fate. Financial markets are already betting that Portugal will need a bailout. And, if worse comes to worst, it could even happen to Spain, which would surely mean the end of the euro as we've known it.

But what would really happen if the euro collapsed? Would it really herald a return to the good, old days, to a Germany that uses the much-revered deutsche mark? Or could it actually be a harbinger of chaos and economic depression?

Daniela Schwarzer, an analyst of EU economic policies at the Berlin-based German Institute for International and Security Affairs (SWP), sees two possible scenarios.

According to the first scenario, Germany and the other more stable euro-zone countries -- such as Austria and the Netherlands -- would jointly introduce a "hard-currency euro." A similar idea was recently floated by Hans-Olaf Henkel, the former president of the Federation of Germany Industry (BDI) on German public television. Henkel called for the establishment of two distinct euro blocs: a northern one "that doesn't want any inflation and is used to budget discipline" and a southern one that can go ahead and devalue its currency whenever it feels so inclined.

According to the second scenario, Germany actually would return to the deutsche mark. There would no longer be a shared-currency zone in Europe, and each former euro-zone country would decide its own monetary policy again.

But is that something anyone would really want? After all, Germany has reaped all sorts of benefits from the euro. A collapse of the common currency would have dramatic effects. Here is a list of possible consequences:

Article...

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