The odds of a euro collapse increase each passing day, as the number of countries joining the rhetoric of leaving the eurozone rises. Such an event could have a negative world impact on economies and stock markets.
France & Italy to Leave Eurozone?
There’s a huge movement in France calling for an exit from the eurozone. France is the second-biggest economy in the common currency region. If France leaves the eurozone, that will be the end of the euro.
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The movement in France is led by presidential candidate Marine Le Pen. She has said that France should be out of the European Union (EU) and eventually out of the eurozone. (Source: “France’s Le Pen says the EU ‘will die’, globalists to be defeated,” Reuters, March 27, 2017.)
Italy, the third-biggest economy in the eurozone, is in the midst of an election campaign, and there are several political parties calling for an “Italexit.” (Source: “Italy nears EURO exit: Leading parties collapse triggers coalition hellbent on Lira return,” Express, March 28, 2017.)
If France and Italy both exit from the eurozone, a euro collapse will happen instantly.
We are starting to see that investors are becoming skeptical of the eurozone as well. According to a survey of 1,000 institutional and retail investors tracked by Sentix (a behavior finance company based in Germany), one in four investors believes that the European common currency region could lose one member in the coming months. (Source: “Daily Briefing: Euro break-up; nerves rising,” Reuters, February 28, 2017.)
If we look closely, Germany is the only major country not making noise about leaving the eurozone. But how long will it keep that position if its neighbors want out so badly?
What Are the Consequences of a Euro Collapse?
So, what happens if we have a euro collapse? The short answer: dire consequences.
As it stands, the euro is a major currency of the world, and the EU is a massive global economic hub. According to the International Monetary Fund (IMF), the EU is the world’s second-largest economy measured by gross domestic product (GDP), falling only so slightly behind the GDP of the United States.
There’s no rocket science here; if the euro collapses, and the eurozone breaks apart, this is going to cause a lot of concern among businesses, investors, and governments around the world.
A euro collapse is another major risk facing the stock market at a point when major indices like the Dow Jones Industrial Average (DJIA), the NASDAQ, and the S&P 500 all trade near record highs—a sucker’s bet if I ever saw one.
