A single currency is not simply about having the same notes and coins in circulation. A key part of a single currency is having the same interest rate on all sovereign debt, in the same way as there is a single central bank's interest rate. At present, there is no more single sovereign debt interest rate in Euro-zone: for example, German debt attracts much lower rate than Greece's.
The governments must face the fact that the sovereign debt markets decided and Euro-zone governments confirmed it by not introducing a single Euro-zone bonds (i.e. underwritten by all Euro-zone governments collectively): the Euro is not a fully fledged currency any more. It is dead. Now we are dealing with Euro which is a fudge of a single currency. Whether the next step would be to become a single currency again or the Euro-fudge keeps disintegrating is the question for 2011. The inklings are that the latter is very likely to be the case as Germany are unlikely to guarantee debt of other Euro-zone countries such as Greece, Ireland, Spain, Portugal, Belgium, Italy. The list is quite long indeed.
However it is highly likely that European politicians will keep repeating that the Euro is safe and it is business as usual. For an experienced psychiatrist-counsellor this will not come as a surprise. It is called a denial syndrome. For example, some close relatives of the recently deceased refuse to accept this fact for a long time. Indeed this was how the French Finance Minister, Ms Christine Lagarde, came across on the last week's BBC Newsnight.
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Greg Pytel
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