From MarketWatch.com – New D-mark could be twice as strong:
As part of Franco-German saber-rattling over the future of economic and monetary union (EMU), senior Frenchmen are saying that, if by some mischance the euro were to unravel, the Germans would be forced to live with a new currency that would be double the value of the present one — a new form of Doppelmark, and one that would be intensely prejudicial to German exports.
In other words, some influential voices in Paris are saying that unless the Germans give in to demands for action to shore up the weaker EMU members, they will face the risk of an enormously uncomfortable return to the era of national currencies…
Fabius, still a major player within the opposition Socialist party, is a force to be reckoned with. Although he has moved substantially to the left in recent years, he represents a significant current of opinion that believes that France has given too much ground in a political and economic power struggle with Germany over EMU.
Fabius led the ultimately successful “no” campaign in the 2005 French referendum on the European constitution, partly because he was worried that the European Central Bank set up at the core of EMU had too much power and was insufficiently reined in by democratic rules.
What is more, his view is echoed by some influential voices close to President Nicolas Sarkozy, who has made clear on numerous occasions over the past three years his dissatisfaction with the operation of EMU. An official very close to Sarkozy last week accused Germany of “visceral obstinacy” over EMU, declaring that the German authorities “want to make EMU a mark zone. …. They are seemingly doing everything they can to drive EMU toward an explosion.” He added that such an outcome would give the Germans a new currency that would be “two or three times as high as it is now.”
In his interview, Fabius said that the latest events within EMU were “disagreeable” but that they had not been a surprise.
“Countries like Greece and Ireland are in an impossible position if the interest rate remains high. That obliges them to bring in adjustment programs that kill their growth and with the rate of interest very high, they cannot repay their debt. The advantage given by the euro disappears if you do not have stability of interest rates. That’s the root of the problem,” he said.