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Could the Euro be melted down one country at a time?

This posting is going to have to be of a more than usually interrogative sort, since I am more than usually ignorant of that whereof I blog, and which I will now copy and paste:

Certainly, on my travels, I’m going to be wary of accepting euro notes with serial numbers that are prefixed with the letters Y (coming from Greece) or M (from Portugal).

I shall also strongly steer clear of notes with the serial numbers starting G (Cyprus), S (Italy), V (Spain), T (Ireland) and F (Malta).

This might sound as if I’m being ridiculously alarmist, but you cannot be too careful.

However, other euro notes should be reasonably safe.

These include those marked Z (Belgium), U (France), l (Finland) and H (Slovenia). As for those with serial numbers beginning with X (Germany), P (the Netherlands) and N (Austria), they can all be used with total confidence.

Is this common knowledge? Am I the last person in Europe to hear about this? I shouldn’t be surprised. You can tell which country printed which Euro. Well, well. Who knew? Who, even now, knows?

The above quoted text is from a Daily Mail piece by Peter Oborne (linked to by Instapundit) about the various economic disasters the world faces. One of which is the melt-down of the Euro.

My big question, aside from wondering who else does or does not know this, is: supposing lots of people do know this, or get to know it, does it not provide a mechanism by means of which mere people might hasten the collapse of the more dubious EUrozone economies, by demanding, when being paid in actual money, to be paid only in Euros printed by the undubious countries?

Perhaps the answer might go: but making such judgments would be, in EUrope, illegal. Maybe so, but that won’t stop a black market making minute comparisons between differently lettered Euros, nor will it stop tourists in other parts of the world, planning their EUropean trips, demanding, once they hear such stories, to receive only the kinds of Euros that they would like. They could, for instance, refuse to accept the wrong kind of Euros, or, if given a mixture of good Euros and bad Euros, sort out the good from the bad and swap the bad ones back for pounds, or dollars, or whatever.

The wrong kinds of Euro notes, from the dubious countries, could soon be treated exactly as if they were forgeries, could they not? The big difference being that these forgeries will be easier to spot.

So, the much prophesied melt-down of the Euro can now be accelerated in a much more discriminating way than merely by people judging that the Euro as a whole will soon be disappearing down the toilet. We will all be able to decide – many may soon be forced to decide – which Euros will descend toilet-wards first. Won’t we? Can’t we? Now? I realise that there is more to money than mere bank notes. But if stories like those sketched above were to start circulating …

Has Oborne got his facts right about this? And if he has, do my supplementary questions also make any sense? As I say, this is all completely new to me, so I could soon, after the first few responses, be wishing that I’d never even asked.

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20 comments to Could the Euro be melted down one country at a time?

  • Hmm. That approach sems to make about as mush sense as hunting through a stack of US dollars and rejecting ones that come from specific Federal Reserve Banks and favoring others.

    Unless the Euro isn’t really a unified currency at all.

    Followup question for us even less informed on this topic Americans – do the individual countries have the authority to just crank up the presses and run off as many notes as they please, or is there a centralized controlling authority that governs this? Realizing, of course, that there is far more ‘virtual’ money existing in the form of electronic balances on ledgers than in actual physical existence and circulation. . . the answer to that would give credence, or put the tinfoil hat, whichever the case may be, to the hypothesis, one would think.

    However, of course, that makes the assumption of an underlying rationality. And we know about assumptions. . .

  • Preview is apparently the friend I have yet to fully embrace. Although, “mush” does somewhat fit. . .

  • Nuke Gray

    What will all this do for your Pound? Will it now seem safer, even with those austerity measures?

  • All of this was being said some years ago, when Italy was looking particularly dodgy.

    DK

  • idonotbelieveit

    Apparently many German citizens have been screening their money’s serial number in this way for some time

  • lukas

    I’ll gladly buy your Portuguese euro notes at a discount and deposit them with my bank, who will be happy to accept them at par value.

    Euro bank notes may reveal their country of origin, but most other forms of euros don’t.

  • passer by

    Royal Bank of Scotland bank-notes, signed by Fred Godwin, are still being accepted in the UK at face value. So I find it hard to believe that Euro notes will come to have different values.
    If we’re looking at hypotheticals, however: suppose Germany left the Euro, and offered an initial exchange rate of 1DM to 1Euro why would anybody hang on to a Euro?

  • Chuckles

    Since the Euro – Deutschmark rate is fixed at 1.95583, that doesn’t sound like a particularly good deal to me. I’d imagine that the fixed rates are part of the problem, but hey, I’m sure we can rustle up any number of economists to tell me otherwise.

    http://www.sussex.ac.uk/Units/currency/

  • An analogy might be the break up of the Soviet rouble. One of the problems they had 1990 ish was that all of the now independent but formerly constituent republics had their own printing presses, pumping out entirely valid roubles.

    Thus it was Russia that introduced its own rouble……

    However, the reason this would be a bad analogy is because the cash euro is such a tiny part of the money supply across the EU zone. Electronic euros are vastly more important and there is no differentiation between them.

  • As implied by others, all Euro notes are legal tender, at par, in all countires of the Eurozone. A Portuguese Euro is worth, by definition, one Euro, wherever you are on the globe.

    When Portugal starts printing idiosyncratic Portuguese Euros, with a different design, that will be an issue.

  • Tim:

    When I was in Crimea back in 1992, they were printing “kupony” not for the ruble, but for the ruble-equivalent karbovanets. There were kiosk money changers willing to buy ruble notes at par with the kupony. It struck me as humorous that they thought the ruble was a stable currency, at a time when the Russian ruble had already slid to 100+ to the dollar. (This before any of the revaluations, of course.)

    I still have one that I’ve transferred from wallet to wallet for close to 20 years now, as well as a few in a better condition next to my Latvian ruble notes from the same time that were also on par with the Russian ruble. And someplace I should have a few old Soviet/Russian one-kopeck coins.

  • JohnB

    You never know what tricks they can get up to, indeed, absolutely anything can happen. But I would think CountingCats is correct.
    So much energy, lies and money have/has been devoted to welding Euro into one I doubt they have any plans to allow it to separate. I think their plan of action is more focussed and planned than that.
    It will possibly go on to greater things.
    The Global Dinar?

  • JohnRS

    Comparing Euros from different countries with Scottish/English pounds or US Dollars from different Fed plants overlooks the basic (and essential) difference between both of these currencies and the Euro.

    The dollar and pound each come from one country with a single Central Bank plus one set of legal, tax and fiscal rules that cover the whole currency area. There’s a single government and Chancellor/Fed Head. So it’s one country, one currency.

    The Euro has no single bank, government, financial environment or controlling political entity and so (in blunt truth) is not a single currency at all. It could easily be split apart into a number of differing “Euros” if folk start to discriminate between currency areas – like they are doing with state loans right across the EU as we speak!!

    Vetting banknotes is just another symptom of the fault lines that are opening up across the EU, despite the vast loans that are supposed to paper over the cracks.

  • Sam Duncan

    Actually, JohnRS, while it isn’t the same, I think the situation with Scottish notes is closer than you might think. The Scottish banks issue their notes under, effectively, licence from the central bank. If word were to get around that one of them was issuing more than it should be (only marginally more likely than a Fed press, and much less so than a Eurozone government, doing the same, but certainly concievable), it would surely affect the acceptability of those notes. Within living memory, English banks charged a shilling on the pound for handling Scottish and Northern Irish notes.

    But I think it’s important that Scottish notes look different. Little things like that matter. If the various countries’ Euro notes had more obvious dinstinguishing features, I can’t help thinking that the venture would have collapsed in chaos years ago. As it is though, it’s quite hard to tell Euros apart, and easy to confront a failure to accept a note with the fact that it’s a Euro, the same as all the other ones in your wallet (certainly easier than pointing out to a truculent English shopkeeper that the Royal Bank of Scotland plc promise to pay the bearer on demand Ten Pounds Sterling, see, there, dammit). That should limit this effect somewhat.

  • hovis

    This is wishful thinking – Euro notes are guaranteed by the ECB. Any colapse of teh euro is binary – rather like being pregnant it is or it isnt. So discriminating on where the notes are printed is facile. I am no suporter of the Euro btw

  • I think all the Euro members are legally on the hook for all the Euro notes circulating (which is only a fraction of the money in banks). However I can imagine Greece being forced to close its borders for a few days & transfer all notes & bank accounts into New Drachmas. I wonder if there is already a warehouse full of such notes? This is pretty much what the allies did in Western Germany after the war replacing the Occupation Marks which, like the Euro, though officially a common currency, could be printed by all the powers. Didn’t work then either.

  • Peter Norton

    Actually I’d imagine that bank deposits would be the first to self-segregate.

    Read http://thomasbarker.com/10/05/euro-fragmentation-yes-sepa-can(Link)

  • Giovanni Frittoli

    I’m italian, living in spain and thinking about this problem since the Euro was made. I’m glad I find somebody talking about this matter abroad (here it is impossible to even talk about it, people were bombed with elementary informations). I THINK YOU ARE TALKING ABOUT SOMETHING BIGGER THEN WHAT YOU MAY THINK.
    This is my opinion.
    First of all: The euro is called “unified currency” but it is a simple equality among different currencies. The europen countries simply changed the name and the design to their bills and called all them “euros”. (the rate exchange from national currencies to 1 euro was the one the markets managed that day, so 1936 liras=1 euro or 166 pesetas=1 euro). Of course it was necessary to understand where they came from, and that’s possible by the letter. The Italian lira was converted to “italian euro”. The german mark to “german euros” etc. Beside that they decided to fix the exchange rate (1 to 1) just like Argentina decided to do some time ago with the US dollar. I would say that so far it is just an “accounting operation”.
    Second: But the single countries CANNOT print what they like. That’s becouse, beside the “accounting operation” at point one, they made two real decisions. They decided to delegate the monetary policy (decision on the quantity of money on the market and official interest rate) to the European central bank.
    Also they fixed some criterias the single countries had to respect and the fines if they didn’t (critteria of Maastricht).

    Third (and very important): when they made the Euro they DID NOT decide how to get out of this international agreement if a country could not respect those criterias (it’s clear that to give fines to pay to a country that does not respect those criterias just makes things worse and the criterias get even farther).

    CONCLUSION
    It is obvious that the euro CAN melt down and that single currencies (italian euro, german euro, spanish euro etc.) start floating on the market with different exchange rates. Just like US dollar and Canada dollar.
    That’s as obvious and certain as it is the existance of soverignty of the single european countries.
    And I totally agree with JhonRS that the markets can force it, just like they did with states loans (pubblic debts) of different euro countries.
    The problem is: HOW DOES THIS GOES?. Frinedly or unfriendly?
    If forced by the markets, how can the european countries get out of the euro’s agreements? (P.S. Spain actually has a 20% unemployment rate, greece is in recession).
    I’m very very very worried about this point. For the notes it looks simple (you look at the letter and you know if you have german euro or spanish euro). For the current accounts and other assets it may also be easy (you look at the residency of the accounts, so if you have an account on the spanish territory you have Spanish euro, if in germany, german euro.
    But (and here is the big problem) it is more than 10 years people and companies make national and international contracts in Euro (without deciding if in italian, spanish, german … ones). And in this 10 years where created an ammount of credit/debts between different countris in “Euro”. As example, spainish banks have received billions euros from german banks. What was that? German euro or spanish euro? I’m afraid that if they try to melt down euro, the german bank (the creditor) will say it was german euro and the spanish one (the debtor) will say that’s in spanish euros. That’s becouse the day after the melt down the spanish euro we can imagine will be worth 50% the german euro.
    I wish to remember that europe fall into war (twice) this century for a problem of international loans.
    I like to think that the founders of euro didn’t think of an exit strategy becouse they dream a single country, with a single politics and economical authority, for europe. SO DO I. But here lately people talk about regional independecies (north italy, catalonia in spain, paises bascos etc. etc.).
    WE NEED ONE EUROPE ONE COUNTRY. HELP!!!!!!

  • Giovanni Frittoli

    I’m italian, living in spain and thinking about this problem since the Euro was made. I’m glad I find somebody talking about this matter abroad (here it is impossible to even talk about it, people were bombed with elementary informations). I THINK YOU ARE TALKING ABOUT SOMETHING BIGGER THEN WHAT IT MAY APPEAR.
    This is my opinion.
    First of all: The euro is called “unified currency” but it is a simple equality among different currencies. The europen countries simply changed the name and the design to their bills and called all them “euros”. (the rate exchange from national currencies to 1 euro was the one the markets managed that day, so 1936 liras=1 euro or 166 pesetas=1 euro). Of course it was necessary to understand where they came from, and that’s possible by the letter. The Italian lira was converted to “italian euro”. The german mark to “german euros” etc. Beside that they decided to fix the exchange rate (1 to 1) just like Argentina decided to do some time ago with the US dollar. I would say that so far it is just an “accounting operation”.
    Second: But the single countries CANNOT print what they like. That’s becouse, beside the “accounting operation” at point one, they made two real decisions. They decided to delegate the monetary policy (decision on the quantity of money on the market and official interest rate) to the European central bank.
    Also they fixed some criterias the single countries had to respect and the fines if they didn’t (critteria of Maastricht).

    Third (and very important): when they made the Euro they DID NOT decide how to get out of this international agreement if a country could not respect those criterias (it’s clear that to give fines to pay to a country that does not respect those criterias just makes things worse and the criterias get even farther).

    CONCLUSION
    It is obvious that the euro CAN melt down and that single currencies (italian euro, german euro, spanish euro etc.) start floating on the market with different exchange rates. Just like US dollar and Canadian dollar.
    That’s as obvious and certain as it is the existance of soverignty of the single european countries.
    And I totally agree with JhonRS that the markets can force it, just like they did with states loans (pubblic debts) of different euro countries.
    The problem is: HOW DOES THIS GOES?. Friendly or unfriendly?
    If forced by the markets, how can the european countries get out of the euro’s agreements? (P.S. Spain actually has a 20% unemployment rate, greece is in recession).
    I’m very very very worried about this point. For the notes (money bills and coins) it looks simple (you look at the letter on notes or the design on coins and you know if you have german euro or spanish euro). For the bank’s current accounts and other assets it may also be easy (you look at the residency of the accounts, so if you have an account on the spanish territory you have Spanish euro, if in germany, german euro).
    But (and here is the big problem) it is more than 10 years people and companies make national and international contracts in Euro (without deciding if in italian, spanish, german … ones). And in this 10 years where created an ammount of credit/debts between different countries in “Euros”. As example, spainish banks have received billions of euros from german banks. What was that? German euro or spanish euro? I’m afraid that if we have to melt down the euro, the german banks (the creditors) will say it was german euro and the spanish ones (the debtors) will say that’s in spanish euros. That’s becouse the day after the melt down the spanish euro we can imagine will be worth 50% the german euro. This scares me!
    I wish to remember that europe fall into war (twice) this century for a problem of international loans.
    I like to think that the founders of euro didn’t think of an exit strategy becouse they dreamed a single country, with a single politics and economical authority, for europe. SO DO I. But here lately people talk about regional independecies (north italy, catalonia in spain, paises bascos etc. etc.).
    This is at least what I think I understood. I might be wrong, but I belive the only solution is “one europe one country”. That’s not easy.