Will the Euro split?

Dennis Gartman: Euro Crisis a 'Virulent Disease' Published: Monday, 10 Jan 2011

1:41 PM ET By: Drew Sandholm Web Producer

Original Post: http://www.cnbc.com/id/41002974/
 
 

The euro could soon unravel, said renown currency and commodities trader Dennis Gartman on Monday, as the European Central Bank threw Portugal a temporary lifeline by buying its bonds.

In the next several years, Gartman thinks the currency will break into a northern euro and a southern euro. Germany, he said, won't stand to continue to fund countries like Greece, Spain and Portugal — all of which have lesser average work weeks, lower productivity rates and lower savings rates, he said.

"A break-up of the euro would be so catastrophic to the economic environment, that China would not want that to happen," countered Brian Kelly, founder of Kanundrum Capital.

Just as the euro is about to unravel, Kelly thinks China will support the troubled currency, buy euro bonds and therefore gain more say in the International Monetary Fund. Gartman added that he, too, doubts China wants a break-up to happen, but also doesn't think China will be willing to spend money to keep it going.

Germany, France and other euro zone countries are pushing for Portugal to seek an European Union-IMF assistance program, as Greece and Ireland had, to prevent spreading contagion to Spain, according to a Reuters report citing a senior euro zone source. German Chancellor Angela Merkel, however, has denied the report.

The Portugal bailout talk is simply "random noise" and no reason to change your portfolio, said Gartman. Being as the euro is "demonstrably weaker," he thinks "a small bounce is to be expected." If one has no short position, however, he suggests using this rally to get short. Being as he thinks Europe's problems are long-term, he would sell any rallies in the euro.

With more than 30 years of experience as a currency and commodities trader, Gartman is a "Fast Money" contributor and publisher of the widely read "The Gartman Letter."