An interesting article by Ambrose Evan Pritchards in the Telegraph today regarding some predictions for the year ahead including Germany ditching the euro. The main points are outlined below.

China to devalue

Since the purpose of New Year predictions is to stick one’s neck out, let me hazard that China will devalue the yuan in 2012.

Recession in Europe

The European Central Bank has guaranteed trouble by letting M3 money contract. Fiscal tightening into the downward slide will make matters worse. A credit crunch as banks shrink loan books by €1 trillion to meet capital ratios will do the rest. All policy levers are set on deep recession, and deep recession is what Europe will get.

Trouble in France

Politics will fracture further, splintering to the hard Left and Right. The Front National’s Marie Le Pen’s will beat Maréchal Sarkozy into the French run-off invoking ‘terroir’ and the ancient franc.

Downgrades

Europe’s self-defeating policies will bring a blizzard of downgrades. France’s AAA will go, obviously. So will Austria’s as banking woes deepen in Hungary, Ukraine, and Croatia. Vigilantes will take a closer look at Holland’s household debt, off the charts at 270pc of disposable income.

Germany to dump the Euro

Germany will not be able to fudge EMU any longer. It must either immolate itself, accepting a debt union and internal inflation to save a currency it never wanted and doesn’t love; or opt instead to uphold fiscal sovereignty and the essence of its own democracy, and let the Project die.

The shrewd, equivocating, ice-cold Chancellor will quietly oust arch-europhile Wolfgang Schauble and let the Project die, always pretending otherwise.

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