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Will Germany Destroy the Euro?

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On Monday, Dennis Gartman appeared on CNBC's Fast Money. In his appearance, he predicted that within the next two or three years, Germany would withdraw from the Eurozone.

His prediction stands out from the general consensus, as many economic commentators have predicted that the debt ridden countries of Greece, Ireland, Portugal and Spain would be kicked out of the Eurozone long before Germany contemplated leaving.

Gartman does not believe in that scenario, instead pushing the idea that Germany will get tired of footing the bill for its spend-happy southern neighbors.

Gartman's theory has a certain appeal. One can see how German tax payers would get fed up with paying for the welfare of Italians, Greeks, and Spaniards.

However, Germans are not feeling any squeeze for the time being--the German economy is humming along just fine.

In fact, if Germany withdrew from the euro it could have disastrous consequences. The new German currency may be far stronger than the euro. A strong German currency means fewer exports--a sector Germany relies upon heavily.

Traders who believe that Gartman may be on to something might consider taking a short euro position. Gartman, by his own admission, believes that Germany leaving the euro would happen over a period of years into the future, but traders might still consider locking in a position in ProShares UltraShort Euro (NYSE: EUO).

Conversely, traders might be inclined to dismiss Gartman's claims on the grounds that Germany needs a weaker currency to keep its economy on a solid foundation. In that case, traders may consider a position in iShares MSCI Germany Index Fund (NYSE: EWG). EWG attempts to return a value relative to the broader performance of the German economy.

 

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