Euro and Greece Crisis Analysis

The Greek debt crises and the euro to become the most heated topic at the moment. A total of 330 million people worldwide currently use the euro, if we consider a fixed exchange rate system and the euro currency, the euro affects the world's 480 million people. Therefore, the total value of euro cash in circulation is more than the dollar, and consequently, the euro's affect to global economic trends attracts much attention from many people.

However, from the euro's inception, many people have never thought of Euro's reign over the dollar. Soros, the financial tycoon, said any kind of sophisticated sound monetary system will require a joint effort and cooperation from both central bank and the Ministry of Finance. When the financial crisis hit, the central bank can provide liquidity, and the Ministry of Finance deal with the debt. Formed by the 16 nations, euro zone is only a monetary union, not a political alliance, in institutional settings. There's only a European Central Bank, not one single "European Ministry of Finance".

Soros's statement indicates that the euro's recent dramatic plunge may find its trace set. It is reported that earlier in February, hedge fund managers participated in a meeting in the industry gatherings, and expected euro to fall to same value as the dollar, that is, 1 euro to 1 dollar. Morgan Stanley data show that hedge funds's shorting of euro in a week has reached a record 6 million futures contracts - the highest level since 1999. The euro sold off once again against the U.S. dollar below 1.36. Traders expected Goldman Sachs, Merrill Lynch and Barclays Bank and other institutions to increasingly short Euro.

If there is no more help from affluent countries within the European Union, Greece probably have really no chance to recover, while the euro is also facing collapse. But because the German bank is the Greeks' creditors and therefore the Greek sovereign debt defaults is still the largest in Germany, so Germany will help Greece. Apart from Greece, other than the euro-zone countries, Spain, Portugal and Italy have similar financial problems, if not resolved soon as the debt crisis, in Greece, Spain, Portugal and even the euro-zone countries of Eastern Europe the debt crisis will be falling dominoes, leading to the final collapse of the euro. Therefore, Germany, France and other EU countries will eventually pull the Greek finance a shot.

This leads to weakness in the heart of the euro - the separation of monetary and fiscal sovereignty. The euro is the European Union's results of transferring out of monetary sovereignty, while not the country's financial sovereignty. Money is essentially a credit, the backing behind a country's economy. The great economic disparity between countries within the EU, the corresponding monetary and fiscal policy cannot be the same, once the fiscal policy is inconsistent, the consequences of a natural reaction to the monetary value of the above are necessary. On this sense, the monetary and fiscal policy is indivisible. European Union countries should transfer monetary sovereignty, while also transferring out of the next fiscal sovereignty, or the euro will be doomed.

Recently, the EU institutions member states, and the European Union struggle for power. The birth of the euro did give EU countries many benefits. Once the euro collapse, the end of the European integration process, its economic collapse, the consequences of any country within the EU are inevitable.

This time the Greek sovereign debt crisis sounded the alarm to the EU member states: If they want to continue to see the euro exists, then they should only gradually transfer fiscal sovereignty and establish a "European Union Ministry of Finance." This crisis, to the European economy, European history and euro, might well be a major turn for the better. Nonetheless, only the Europeans can make the right moves to save themselves.