The Euro in its current form cannot and will not be able to exist. The markets have been relatively calm over the past few weeks which is also known as the eye of the storm. Several geopolitical problems currently enjoy this eye of the storm sense of calm and security. Policy makers as well as traders should be extremely careful as the clouds get dark faster than dumb money can congratulate them on what they believe has solved the Eurozone debt contagion.
Their guard is down and they have no idea what calamity is moving their way. The ECB has only addressed symptoms of the crisis and no action has been taken to heal the core of the problems. The longer necessary action will be delayed the bigger the core problems grow and the bigger the impact on the global economy will be.
Besides a banking union, the Euro needs to be split up in two. The founding fathers of the Euro did not have that in mind, but they also failed to predict that some members will gain access to the Euro by fraudulent activity such as Greece did. We need the creation of a Euro North and a Euro South. Without going into too much structural detail, we will simply name the member countries for each Euro.
- The Netherlands
The above nine countries should form the Euro North. The Euro North will be the stronger one, but will have the required firepower to solve any issues between those nine countries. The ECB will have to split in two as well and the ECB North should remain in Frankfurt where it is currently located.
The above six countries should form the Euro South. The Euro South will be notably weaker than the Euro North with many problems to address. The ECB South should be located in Milan which would give Italy power of currency union and please Northern League politicians as well as Berlusconi who plans one of his countless comebacks to the Italian political scene.
Greece as well as Portugal need to leave the Euro and restructure their countries outside the Eurozone before considering a new bid which would land them in the Euro South. Denmark and The United Kingdom should remain outside the Euro and Sweden should do so as well. Once Bulgaria, Hungary and Romania are ready to join they would be placed in the Euro South. The Czech Republic, Latvia, Lithuania and Poland would be placed in the Euro North.
In total the Euro North would have thirteen member countries and the Euro South would count eleven while three EU members would remain independent.