Sunday 19 January 2020

Don't bank on death of euro but do play it safe

If you believe the single currency is doomed, then there are options for your savings, writes Marc Coleman

Reports of the euro's death are exaggerated. It will, I believe, survive and emerge stronger in the new year. I could be wrong, of course. But some striking news that broke last Thursday convinces me I'm not. News that George Soros -- the man who broke the Bank of England back in 1993 -- gobbled €2bn worth of eurozone bonds from failed investment house MF Global is striking for two reasons. Firstly, the money came not from a hedge fund but from his own personal stash. Secondly, he made the deal last October when the prospect of a new fiscal regime for Europe seemed remote. But not everyone is as confident as I am. And here are some options to consider if, unlike me, you think the euro won't see in the New Year.

Under EU legislation you are entitled to open a bank account anywhere in the EU. In most EU countries the maximum deposit guaranteed is €100,000.

However, if you keep your money within the EU, Finance Minister Michael Noonan will still be getting his extra three per cent in DIRT off you. As long as you remain tax resident in Ireland, your DIRT-tax ass belongs to this Government, regardless of where your money is.

Let's look at some euro scenarios. The first scenario is that the euro survives but Ireland (due to treaty rejection), Greece and possibly Italy, Spain and Portugal are no longer members. If this happens, the euro is likely to become a more cohesive northern affair and strengthen relative to sterling. Ireland's new currency is likely, initially at least, to weaken considerably relative to sterling.

Having a German euro account would be preferable to sterling. But sterling would, in this scenario, be preferable to holding funds in whatever new Irish currency emerges. By joining the trail of VAT refugees up to Newry, you can open an account in one of the sister banks of whatever institution you bank with, and, if you're with Danish-owned NIB, you can open a Danish kroner account with its sister Northern Bank.

Because the Danish kroner is pegged with the euro it is likely to hold its value against a post break-up euro.

Scenario two is that the euro doesn't survive. If you believe this will happen then hop on a flight to Frankfurt now and open a German euro account. That account will become a new deutsche mark account and you'll be holding possibly the strongest currency in the world.

Scenario three is that the euro survives but remains crisis-ridden. And if you really believe that, then currencies like the Singapore dollar, Swiss franc, South Korean won and Danish kroner offer a safe haven in countries that are well run, efficient and economically successful.

Opening a sterling or dollar account may also seem attractive in this scenario, but caution is needed. Even compared to the eurozone economy, the US and UK are actually more indebted and, in the long-run, in more trouble.

Now, the broader question of a treaty remains to be resolved, but the political will to do so is strengthening. For that reason, I believe the euro will survive and Ireland should and will remain in it.

So, personally, I'm with Soros on this one. But, hey, it's your dough and you're responsible for it. So make your judgement and place your bets.

Marc Coleman presents 'Coleman at Large' each Tuesday and Wednesday from 10pm on Newstalk 106-108fm

Sunday Independent

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