Thursday the head of the ECB in a surprise suggestion in a speech at a prize award posited the boldest relinquishment of individual sovereignty as the necessary step for European nations participating in the common currency to deal with their financial constraints. Prediction: both south and north nations will be shocked — shocked I tell you — at the suggestion. But then they will realize the impeccable logic — if you are going to have a single currency, you need to have such an ability to deal with asymmetries. Will they be able to stomach it? I doubt it. But if they can’t, it will have finally identified the line in the sand which would define the ability to hold the Euro together (it is astounding that it has so nearly held together for over a decade without, but I guess that has been a tribute to a period [until recently/the last 3 years] when favourable economic conditions raised all boats — sufficiently equally to muster through. No more.)

Dusseldorf will not like the suggestion any more than Athens — and that general distaste for the logical necessary condition will be the death knell of the Euro. It will be very interesting to watch it unravel. All those with any kind of Euro involvement, beware. It becomes very unpredictable (as to timing, mechanism and end result) and volatile as a result.

Posted by Jay Richardson, Range Corporate Advisors