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Updated Wednesday, May 5, 2010 9:44 am TWN, By Matthew Lynn, Bloomberg

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Euro breakup can be profitable for investors

Italy has just been stuck with a decade of restrained growth compared with the 1990s. Liberated from the shackles of the euro, the Italian economy could start to motor again if the currency can be devalued and wages can be held in check.

Four: Sell Spanish banking stocks. Led by Banco Santander SA, the Spanish lenders have risen to global prominence. Santander is the 11th-largest bank in the world, measured by market value. Banco Bilbao Vizcaya Argentaria SA is in the top 40. But Spain is a relatively small country, with unemployment exceeding 20 percent and an economy still in recession. Without the euro, its banks would find it impossible to maintain those kinds of positions in the global financial system.

Five: Sell anything to do with Belgium. The collapse of the euro would mark the end of the process of constantly expanding the European Union — or what is sometimes known as the Belgian Empire. As the hub of a global superstate, Belgium has a certain status. Without that distinction, it becomes a small place where you can buy some nice chocolate and change trains.

Save Itself

Six: Buy the pound. Sure, the UK might have a terrible budget deficit, shaky banks on every corner, and no stable government after this week's election. But at least it stayed away from the mess of currency union. It won't have to bail out Greece, Portugal or Spain. It just has to save itself. Against its neighbors, it will look rather stable. That should be worth a few points on sterling.

Seven: Buy airlines. For a few years, the “new drachma” would make the Iraqi dinar look like a haven of stability. It would plunge, and wealthy northern Europeans would be taking three or four holidays a year on Greek islands. That would be great for the companies that fly tourists there. Add in the weakness of the new Portuguese escudo, Spanish peseta and Italian lira, and the guys at Airbus SAS will be working nightshifts to keep up with the demand for new planes to get everyone to the beaches.

A fortune is waiting for investors who get on the right side of history, and everyone else will get cheap holidays. Maybe these storm clouds will have a silver lining after all.

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