Currency desintegration in the EURO-Area - two scenarios of national insolvency and inflation as a consequence of the financial market crisis

The concept of optimum currency areas as well as historical examples of failed monetary unions make the success of the EURO-area doubtful. Currently the deficits of public-sector budgets as a result of spending(commitment)s caused by the salvaging of banks and the promotion of economic activity as well as by ensuring the reliability performance of crises-ridden public welfare systems are threatening the solvency of various member states of the EURO area. At the same time, a national insolvency and an increasing rate of inflation may be strategies of debt relief in subsequent years. Both framework conditions form the basis of two hypothetic scenarios of member states bidding farewell to the EURO area illustrated by the examples of Italy and Germany. In addition to the choice of the future exchange-rate system and the production and provision of the new currency, it is necessary to consider a two-tier rate of exchange. Dangers of disintegration on account of inflation would exist where EURO holdings are inadequately reduced and where members increasingly bid farewell to the EURO area. Regulations governing an organized exit as well as a graduated disintegration process on the basis of a national parallel currency are deemed to be urgently required but nevertheless utopian.