FinancialGuy Writes!

Your author has just returned from a short weekend trip to Berlin. This is not my first visit, but it was my first time with a group of people that are mostly German, live in the city and know it well. In other words, I was able to see and learn much more than the typical short tourist city break seeing the usual sights.

As we walked from street to street, three members of this group separately told me the same thing about different areas.

“Property prices are rising here”.

I then followed those statements with the obvious question, “Why is that?”

Each one then independently of the others explained that, “There are a lot of Greek’s buying property for cash right now”.

I have conducted no research to back up those claims, but many of us will have seen news reports over the last twelve months or so that there are large numbers of Greeks buying property in London or transferring money out of the country. This seems to fit the previously established narrative.

Individually, the decision as to whether or not to keep money in Greece during these troubled times is being made sensibly and rationally. Yet as a collective, this outflow of money from the Greek banking system condemns the country to an even deeper and more troubled future. One presumes that much of this money is the result of all the untaxed income that we now hear so much about.

I fear that this is an example of what might happen if the eurozone crisis really gets serious. (I know it is very serious already and has been for a long time, but I mean countries leaving the eurozone serious, or worse).

If the currency starts to collapse, the sensible and rational action for tens of millions of people will be to move their money. The sensible and rational action for a number of European governments will be to introduce currency controls and close borders to try and stop that from happening. Currency smuggling would likely become a massive problem with a massive impact on banks and governments.

Suddenly, governments would be rolling back years of European development in areas such as the single market and Schengen (and I am sure many others that I cannot presently think of). Following the negative impact on democracy that we have already seen (unelected technocratic governments in Greece and Italy), political instability (how many governments have now fallen because of the euro?), the rise in unemployment leading to social problems, it might follow that European treaties are the next to suffer.

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