Falling sterling & the suggested collapse of the Euro

Some have argued that the falling value of sterling will not have an inflationary effect. I do not believe this to be so because import led cost-push inflation is compatible with recession in the British economy.

It is sometimes argued that the Eurozone will collapse in the current economic crisis. Yes, it will come under severe strain, but two things will probably hold it together. First, there would be the will to avoid the political humiliation of being forced out of the zone. Second, departing the zone would be an economic disaster. National public debt for the leaver would be denominated in euros and would therefore inflate against the ‘new currency’, while the whole population would hold euros in the transition period to make a gain at the time the ‘new currency’ floated free of the euro.