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The Fall of the Euro: Reinventing the Eurozone and the Future of Global Investing

© 2014
by Jens Nordvig

1st Edition Active, In-Print 272 Pages Hardback
9780071830577 007183057X
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From Jens Nordvig--named the #1 currency strategist in the 2013 Institutional Investor survey

What does the crisis in the Eurozone mean for our markets?and how can you protect your portfolio against crises in Europe?

Little has been written about the instability of the Euro, but it's a very real threat to investors worldwide, as well as to the global economy. Swings in global asset markets have been increasingly driven by developments in Europe. This is something new: in the past, Europe was one of the most stable parts of the global economy, and its typically minor economic fluctuations would have little bearing on US equity markets.

Now, Europe's economic and political developments will be a persistent source of shocks for global financial markets.

As an investor, you need a roadmap. This book is that roadmap.

The Fall of the Euro describes the Eurozone's unstable equilibrium and explains why a breakup of the Eurozone is still a possibility.

Nomura's global head of currency strategy and one of the world's top experts on the Euro, Jens Nordvig gives us a detailed and fascinating explanation of this precarious situation, providing the information, insight, and authoritative analysis you need to make the wisest investment decisions possible.

A riveting analysis of one of the most important currencies in the world--certainly the most unstable of the major currencies--The Fall of the Euro covers:

  • The history of the Euro--and how it differs from other global currencies
  • The problematic origins of the Euro--which is grounded more in politics than economics
  • How politics will affect the next crisis in the Eurozone--and what we can do about it
  • What-if scenarios of Eurozone breakup possibilities--with insights that will surprise you

The original version of the Euro was not resilient enough to survive a major crisis. European policymakers are attempting to construct a new version of the currency, but its specific form remains highly uncertain. Will it be a hard currency? Will it be a soft currency? Or will it break up?

If the path ahead involves a disorderly breakup of the Eurozone, the instability to come will be much more intense than what we have seen to date.

Go beyond the rhetoric of the politicians and the journalists who write about them and get a financial expert's assessment of the real issues at hand. Jens Nordvig explains the state of the Euro's present position in the global economy with levels of objectivity and expertise you will find nowhere else.

The Fall of the Euro gives you the critical information you need to prepare your investments before the next crisis in the Eurozone--which is, in Nordvig's view, inevitable.

Praise for The Fall of the Euro

"Nordvig brings a keen insight into markets and economics that he ably combines with a brisk, no-nonsense narrative. This is essential reading for market players, investors, and prognosticators of the future of the eurozone." -- Richard Clarida, C. Lowell Harriss Professor of Economics and International Affairs, Columbia University; Global Strategic Advisor, Pimco

"Jens Nordvig's book artfully combines a master economist's framework, a seasoned market participant's advice, an historian's far-reaching perspective, and a
European citizen's passionate case for an open discussion of the way forward for the world's largest economic bloc."
-- Scott Bessent, Chief Investment Officer, Soros Fund Management LLC

"Jens Nordvig was one of the first to analyze the economic, legal, and political consequences of the euro splitting asunder. Whether or not you share his pessimism
about the future of the euro project, Nordvig's guide to the crisis is a compelling and essential read."
-- Gavyn Davies, Chairman of Fulcrum Asset Management LLP,
former Goldman Sachs Chief Economist

"In this bold, highly readable book, Jens Nordvig beautifully highlights the tensions between the politics and the economics that are at the heart of the euro crisis. A must read for anyone who cares about the future of Europe." -- Anil Kashyap, Edward Eagle Brown Professor of Economics and Finance, University of Chicago Booth School of Business

"I learned much from The Fall of the Euro and I thoroughly recommend it." -- Simon Wolfson, CEO of Next plc and sponsor of the Wolfson Economics Prize

"Needs to be read by all those demanding brave policy from Europe's timid elite." -- Tom Keene, Editor at Large, Bloomberg Television & Radio; Host of Bloomberg Surveillance

Preface ix

Acknowledgments xiii

Introduction xv

PART I The Euro: The Early Years 1

Chapter 1 The Premature Celebration 3

Chapter 2 The Birth of the Euro:
A Grand Political Bargain 13

Chapter 3 The Euro's Honeymoon Years 33

Chapter 4 The Euro Crisis:
Waves of Escalating Tension 49


PART II European Integration: The Difficult Path 73


Chapter 5 The Big Choice:
More or Less Integration? 75

Chapter 6 The Revenge of Realpolitik:
Europe's Dilemma 83

Chapter 7 An Involuntary Gold Standard:
The Economics of Infl exibility 99

Chapter 8 Where's the Growth?:
The Cost of Deflation 109

Chapter 9 Europe's Political Fragility:
The Seeds of the Next Crisis 123

PART III The Mechanics and Implications of Breakup 141


Chapter 10 When a Currency Splinters 143

Chapter 11 The Devil's Guide to a Eurozone Breakup 153

Chapter 12 What's the Worst-Case Scenario? 163

Chapter 13 Who Should Stay and Who Should Go?:
The Economics of Exit 175

PART IV The Future Euro: Investment Implications 191


Chapter 14 Europe at the Center:
Europe's Effect on Global Financial Markets 193

Chapter 15 A Road Map for the Future Euro 203


Afterword 221

Data Appendix:
The Breakdown of Eurozone Debts 227

Bibliography 229

Notes 235

Index 249


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