The € EURO thread

[ekrem]

Personally I hope Merkel and the Germans get over their hatred of printing money.. because we need to print money to counteract the devaluation of the pound and dollar, but also use that money to be able to fix the structural problems in the south of Europe.

There's only 1 way forward:
The other €-countries have to downsize: Wages down, down with government spending and down with social benefit-payments. And you are back with a happy and healthy economy.
Cutting spending is not nice, but there is not another way to handle the situation. Germany has already gone through this process and still Germany itself doesn't .meet some parts of Maastricht criterias.

The Euro-Zone partners want Germany's money and German commitment to liability for other's debts. They want Germany to pay for Europe exceeding what it already pays through the cohesion policy to the underdeveloped regions surrounding it.

Just as it was planned in Versailles.

 

[Toro]

Spain 10 year government bond yield.

 

[Toro]

Institutions are pulling their deposits out of Italian and Spanish banks.

Euro-zone leaders say they are determined to save the single currency. But the smart money is voting with its feet. First, short-term U.S. dollar-funding markets effectively closed, then the senior unsecured-bond markets shut down, then the interbank market. Now, corporate customers appear to be withdrawing their deposits from some countries' banks. With an estimated €1.7 trillion ($2.29 trillion) of funding to roll over in the next three years, the stresses in the euro-zone banking system look doomed to get worse.

In some cases, the drop in corporate deposits has been startling. In Italy, nonretail customers withdrew €56 billion in the three months to the end of September, a fall of 12%. Intesa Sanpaolo and UniCredit saw corporate deposits decline by 16% and 10%, respectively, according to Citigroup research. Similarly, in Spain, nonretail deposits fell by 20% in the third quarter, with Santander and BBVA losing 10% and 11%, respectively. Even the French banks weren't immune: Société Générale and BNP Paribas saw their corporate-deposit balances fall by 7% and 6%, respectively.

HEARD ON THE STREET: Europe's Smart Money Votes With Its Feet - WSJ.com

 

[PeteEU]

Personally I hope Merkel and the Germans get over their hatred of printing money.. because we need to print money to counteract the devaluation of the pound and dollar, but also use that money to be able to fix the structural problems in the south of Europe.

There's only 1 way forward:
The other €-countries have to downsize: Wages down, down with government spending and down with social benefit-payments. And you are back with a happy and healthy economy.
Cutting spending is not nice, but there is not another way to handle the situation. Germany has already gone through this process and still Germany itself doesn't .meet some parts of Maastricht criterias.

The Euro-Zone partners want Germany's money and German commitment to liability for other's debts. They want Germany to pay for Europe exceeding what it already pays through the cohesion policy to the underdeveloped regions surrounding it.

Just as it was planned in Versailles.

So your solution is to make people poorer? Does that include the rich and bankers? or is it just the lower and middle classes?

 

[PeteEU]

The problem with Spanish banks is Spain. The Spanish banks look more profitable than they really are because they have not marked the value of their loans to market. Spanish banks made loans against this.

And now, they have this.

Spanish banks, under pressure to cut property-backed debt, hold about 30 billion euros ($41 billion) of real estate that’s “unsellable,” according to a risk adviser to Banco Santander SA (SAN) and five other lenders.

“I’m really worried about the small- and medium-sized banks whose business is 100 percent in Spain and based on real- estate growth,” Pablo Cantos, managing partner of Madrid-based MaC Group, said in an interview. “I foresee Spain will be left with just four large banks.”

Spanish lenders hold 308 billion euros of real estate loans, about half of which are “troubled,” according to the Bank of Spain. The central bank tightened rules last year to force lenders to aside more reserves against property taken onto their books in exchange for unpaid debts, pressing them to sell assets rather than wait for the market to recover from a four- year decline.

Land “in the middle of nowhere” and unfinished residential units will take as long as 40 years to sell, Cantos said. Only bigger banks such as Santander, Banco Bilbao Vizcaya Argentaria SA (BBVA), La Caixa and Bankia SA are strong enough to survive their real-estate losses, he said. MaC Group is an adviser on company strategy focused on financial services.

‘Unsellable’ Real Estate Assets Threaten Survival of Smaller Spanish Banks - Bloomberg

Soaring yields and CDS for Spain isn't some lame Anglo-American right-wing plot. The market simply believes Spain has taken on too much debt. Spain had an even bigger housing bubble than the US, relatively speaking. And no, the problem is not just the cajas.

You are in for a rude shock.

You do realize that you proved my point right? "Only the bigger banks... are strong enough to survive".. it is in your quote. And since it is the bigger banks who hold most of the "bad housing debt", then what exactly is the problem? It is not like Spain is trying to ignore or hide the building bubble it went trough... and yes it was worse than the US, but unlike the US, in Spain the average Spaniard did not participate as much in the boom as the average American. Most of the buying was done by expats, which drove up prices.

And look at the numbers... 308 billion in real estate loans and half are in trouble. So that is 154 billion the Spanish state might have to take over adding to their over all debt.

Okay... what will that do to the debt ratio? Well the Spanish economy is about 1 trillion Euros, and has a debt ratio of 64%, which means 640ish billion in debt... so the debt ratio will go from 64% to 80%... the same as Germany btw.... and that is if the Spanish government takes over ALL the bad debt.. which is unrealistic...

So come again on how that is a problem?

For example.. Italy.. 120% debt vs GDP.. world goes in panic mode and says it is too much and Italy cant pay its loans. What the world forgets is that Italy has a primary surplus already, and that we never have gotten out of the US sub-prime mortgage failure, so there is next to no growth. If growth came back then that would mean higher tax income and that would mean a surplus... then the 120% debt would not be a problem and would go down. Now of course Italy has a lot of structural problems in the labour market and society as a whole that prevents mega uber growth the markets like but if they fix those some what, then growth should come back under normal circumstances. And lets not forget, a very large portion of Italian debt is owed to the Italians themselves!

As you can see, Italy's debt has been above 100% of GDP forever.

Rising yields on Italian debt isn't the fault of the collapse of the US subprime market, nor the fault of "right-wing economists." It is the fault of the Italians. The fact that it is happening now is no surprise. When there is a liquidity crisis, the weaker hands get shaken out first. It doesn't matter if the debt is owned by Italians anyways, not when monetary policy is being run out of Frankfurt and Berlin.

LOL seriously? First you correctly state that Italy has had high debt ratio since "forever", and then you say it is not surprising that it is happening now.. what the hell? If debt was such a serious issue as it is claimed to be now, then why was it not such a serious issue 20 years ago? And yes it is right wing policies, Italy has been under right wing control for over a decade.

PIIGS have their own currency as well.. it is just not as flexible as it should be because of the Germany hatred to printing money. Now if the Eurozone could get its act together and fix its structural problems in the Euro then do you expect the markets to say okay? I doubt that... the Eurozone is a good place to keep focus away form the real clusterfucks of the US and UK and use as a blame game when the whole house of cards come collapsing in the US.

Spain is a house of cards. Europe's banks are weak and undercapitalized compared to the US and much of the rest of the world. Blaming it on the British and Americans is really lame, like an alcoholic blaming everyone else for his problems. You Europeans wanted a German currency with German interest rates. You wanted low interest rates and cheap credit, and all the benefits that came with that. You got it. Now you have to live with the aftermath. I imagine Germany will cave eventually, but not before you feel some pain first.

Hog wash. Bank of America has be insolvent for a very long time, and yet nothing has been done about it. CITI is not much better. But unlike the European banks, who have the bear their losses, American banks can push their crap loans onto the US federal government via Fannie and Freddie Mac. Funny how Bank of American managed to get rid of 86 billion of toxic mortgages to Fannie Mae for 500 million dollars.. And how many banks has the US feds taken over since the crisis... several hundred...

And ignoring the facts of who caused this fucking mess we all are in is lame. Americans and the Brits are running form responsibility in starting the economic crisis we all are in now. Yes Europe had its problems and thanks to the Anglo-American "dream" of cheap credit and sub-prime, then Europe was able to ignore the problem.. now with the crash thanks to the American sub-prime market scandal, then Europe is forced to deal with it, and that is all fine and dandy.. but dont come here and claim some sort of economic saint-hood when it is the US and UK that in large parts are responsible for the economic melt down we are all in now.

While Europe has its problems and I dont deny it, and we have our political problems... it is nothing compared to the clusterfuck going on in the US. Not only are there no plans to fix the budget, but everyone is carrying along like nothing is wrong and blaming each other for the ills of the country (when not blaming the Europeans). At least in Europe we are dealing with our deficits and structural problems.... it might take time, but it is happening.

 

[Toro]

You do realize that you proved my point right? "Only the bigger banks... are strong enough to survive".. it is in your quote. And since it is the bigger banks who hold most of the "bad housing debt", then what exactly is the problem? It is not like Spain is trying to ignore or hide the building bubble it went trough... and yes it was worse than the US, but unlike the US, in Spain the average Spaniard did not participate as much in the boom as the average American. Most of the buying was done by expats, which drove up prices.

And look at the numbers... 308 billion in real estate loans and half are in trouble. So that is 154 billion the Spanish state might have to take over adding to their over all debt.

Okay... what will that do to the debt ratio? Well the Spanish economy is about 1 trillion Euros, and has a debt ratio of 64%, which means 640ish billion in debt... so the debt ratio will go from 64% to 80%... the same as Germany btw.... and that is if the Spanish government takes over ALL the bad debt.. which is unrealistic...

So come again on how that is a problem?

It is a problem for the same reason why it is a problem in Italy and Greece - the Spanish economy is not productive enough to grow at a fast enough rate to outgrow its debt.

The fact that Spain's debt would "only" be 80% of GDP isn't particularly relevant. There is no magical threshold that a nation crosses when it suddenly becomes a problem. Countries have defaulted when debt to GDP was 60%. At other times, countries have not defaulted until debt has reached 130%. Reinhardt and Rogoff have estimated that on average, a nation becomes vulnerable when debt hits 90%, but default can occur at much lower or much higher levels. Japan is much higher and they have not defaulted. It depends on the vagaries of the market. And when the market stresses, the first to go are the weakest. Spain is highly-indebted weak economy that uses a German currency. That is a bad recipe.

LOL seriously? First you correctly state that Italy has had high debt ratio since "forever", and then you say it is not surprising that it is happening now.. what the hell? If debt was such a serious issue as it is claimed to be now, then why was it not such a serious issue 20 years ago? And yes it is right wing policies, Italy has been under right wing control for over a decade.

Left-wingers whine about the market and don't understand it. It wasn't an issue for the past 20 years because the market did not perceive it to be an issue. It's not surprising that it is happening now because the market is figuring out the illogic of the eurozone as constructed. It didn't matter when debts were lower and growth was higher. It is happening now because the market has decided to make it an issue now.

In times of stress, the first to get cut off from the capital markets are the weakest credits. We are in a time of stress because European banks have too little equity and European countries have too much debt and not enough growth. When things are good, the cracks can be papered over. When things turn bad, those cracks get exposed. Overlay that with the internal illogic of the eurozone and you have a sovereign debt crisis.

The euro as designed was destined to fail. The math and logic of it - despite the protestations of dreamy-eyed idealists - does not work. It is fundamentally flawed economically. It can work if the more productive north decides to subsidize the less productive south forever, or if the south becomes as productive as the north (and that's not going to happen). So if the German, Dutch and Finnish taxpayer wants to send their money south forever, or if the Spanish, Italians and Greeks want to be as productive as the north, then the euro experiment can work. Otherwise, it will fail as is. And it is failing now.

Hog wash. Bank of America has be insolvent for a very long time, and yet nothing has been done about it. CITI is not much better. But unlike the European banks, who have the bear their losses, American banks can push their crap loans onto the US federal government via Fannie and Freddie Mac. Funny how Bank of American managed to get rid of 86 billion of toxic mortgages to Fannie Mae for 500 million dollars.. And how many banks has the US feds taken over since the crisis... several hundred...

BofA is undercapitalized, but the American banks - including BofA - have raised hundreds of billions of dollars in equity and have removed hundreds of billions of dollars of bad assets off their books. They are far, far better off than the European banks today. This is not seriously debated by anyone.

The European banks, for the most part, denied there was a problem, and resisted raising equity. Now, they are woefully undercapitalized. Dexia is done. The Landesbanks in Germany are essentially insolvent. The Spanish banks are bouyed by their Latin American assets but have their heads in the sand regarding their domestic market. The Greek banks will be on life support. And Italian banks are dumping their Italian bonds.

European banks have been playing Pretend for some time now. They have refused to shop their pools of assets because it would have required them taking marks on the loan books, which would have demonstrated they are woefully undercapitalized. So they pretended there wasn't a problem. Now the market is forcing them to dump their assets and shrink their balance sheets, and the banks hoping to buy enough time to find a solution. They have to because they are shopping their best assets. The best assets will get sold and the shittiest assets will get dumped on to the balance sheets of the states.

And ignoring the facts of who caused this fucking mess we all are in is lame. Americans and the Brits are running form responsibility in starting the economic crisis we all are in now. Yes Europe had its problems and thanks to the Anglo-American "dream" of cheap credit and sub-prime, then Europe was able to ignore the problem.. now with the crash thanks to the American sub-prime market scandal, then Europe is forced to deal with it, and that is all fine and dandy.. but dont come here and claim some sort of economic saint-hood when it is the US and UK that in large parts are responsible for the economic melt down we are all in now.

I'm not the one claiming sainthood. But we've gone through the fire, we've taken our medicine, and we aren't blaming anyone else. You're the one blaming your problems on others, brushing Europe's internal problems aside as if they are easily solvable - "Oh, Italy will be fine once it liberalizes its labour markets." Yeah, good luck with that. Your banks are woefully undercapitalized and they resist doing anything about it. Don't blame others if you got sold. You sucked up the easy credit. You bought the store. That's on you.

While Europe has its problems and I dont deny it, and we have our political problems... it is nothing compared to the clusterfuck going on in the US. Not only are there no plans to fix the budget, but everyone is carrying along like nothing is wrong and blaming each other for the ills of the country (when not blaming the Europeans). At least in Europe we are dealing with our deficits and structural problems.... it might take time, but it is happening.

Yeah, right. Get back to us when the IMF is involved in bailing out America like it is in Europe.

 

[editec]

One of the better discussion happening on this board.

Thanks for your input boys.

Clearly you're paying closer attention to the machinations of Europes debt crises than I am and I appreciate your POVs about it.

 

[Toro]

BTW

Yesterday, Belgian 10 year bonds fell $3. (Par is $100.) That is an enormous move in the bond market. It had fallen $5 in two days.

 

[Toro]

Belgium is the next in line. This is the price of 10 year government bonds issued by the Kingdom of Belgium. It is falling off a cliff.

 

[Trajan]

The problem with the Eurozone is simple - the Eurozone must find at least €3 trillion (give or take) to pay for the sovereign debt “haircuts” and bank losses. Some argue it is only €2 trillion and others argue for €6 trillion.

And those that argue 6 trillion are idiots.. the total debt of the EU is only 9 trillion for god sake out of a 15 trillion economy. The debt of the Eurozone is between 7 to 8 trillion euros.. So these morons are saying that the Eurozone should basically write off all their debt?

Whatever it is, it is such a large number that it cannot be found by borrowing or creating a special fund. The ONLY way to deal with it is to allow the ECB to print, essentially putting a floor underneath Eurozone bonds, especially those of Italy and Spain, both of which governments are too big to save by conventional means.

But Merkel is saying NEIN!!!! She is against printing more EURO's because it will cause inflation and lower the value of the Euro, possibly a lot!

Wow sorry but you or someone you are quoting dont understand economics and the Germans. First off... Germany WANTS a lower value of the Euro... they are an export country and need a lower valued Euro.. it is one of the reasons that Germany cant and wont leave the Euro. But the real reason is a historic one.. Printing money is so much against the German economic model due to flash-backs to the hyper-inflation days of the 1920-30s.



To say the least.. a new German currency would be so strong (since the UK pound and US Dollar are being devalued) that German exports will crash. That is of course on top of the administration costs of switching currency (not to mention time)..



Not really. This is not about bail-outs, because Spain for one does not need one.. nor Italy. This is about confidence in the Euro and Eurozone and structural issues for both the Eurozone and individual European countries. If Italy can get growth going via fixing its structural problems, then it can easily pay its debt. Spain's debt is 64% for god sake,.... how on earth is that a problem and need a bail-out? Does that mean that China needs one too since it has 30+% debt vs GDP?

Either way they are facing huge costs. It is not a choice of whether they will bear a huge cost burden, but just what form that burden takes.

Of course there are costs, and it wont be cheap. And those costs will continue to go up as long as the politicans cant get their act together.. basically Merkel needs to compromise on the whole idea of printing money. But most of all to fix the Eurozone, you will need a treaty change and that opens up a whole different can of worms.

Somewhere in Germany I will bet you there is a memo on what it would take for Germany to leave the euro and who would go with them. Just saying........

Of course there is, just as there is a memo on the US invading Canada and California ceding from the union. Dont mean it is going to happen. There are so many negatives for Germany and very few positives if any... for leaving the Euro.

Not really. This is not about bail-outs, because Spain for one does not need one.. nor Italy. This is about confidence in the Euro and Eurozone and structural issues for both the Eurozone and individual European countries.

the driving force that created the euro wasn't a financial/fiduciary one per se', it was created as political device, that is why it is doomed to fail.

so, in effect it appears that you wish the ECB to become just another 'nation-state' that prints money to pay its bills in the short term?Because they won't grow their way out of this, minus, huge, and I mean huge structural changes.

Until Greeks stop being Greeks and Italians Italians etc etc. the issue will only be kicked down the road, printing presses won't save you and I have my doubts as to Greece et al all of sudden taking orders for what will amount to a lower standard of living from what they perceive as The EU, ala Germany, France etc., not that they aren't going to have one anyway, but its one thing to stumble into it on your own and wholly in another to have one dictated to you.

 

[Trajan]

Belgium is the next in line. This is the price of 10 year government bonds issued by the Kingdom of Belgium. It is falling off a cliff.

I have not checked the news in the last 24....wow.

 

[Trajan]

One of the better discussion happening on this board.

Thanks for your input boys.

Clearly you're paying closer attention to the machinations of Europes debt crises than I am and I appreciate your POVs about it.

and its pretty much 'contention' free

 

[Trajan]

from Toro-

The European banks, for the most part, denied there was a problem, and resisted raising equity. Now, they are woefully undercapitalized. Dexia is done. The Landesbanks in Germany are essentially insolvent. The Spanish banks are bouyed by their Latin American assets but have their heads in the sand regarding their domestic market. The Greek banks will be on life support. And Italian banks are dumping their Italian bonds.

I'd like to point out as part of the theatre of the absurd that has been allowed to fester there, Dexia was 'stressed tested in June and pronounced- healthy, with maybe 5 billion as the HIGHEST level of euro sppt. necessary if push came to shove. We saw how that worked out.

 

[Trajan]

[

As you can see, Italy's debt has been above 100% of GDP forever.

yes BUT, they have not had GDP north of 2% since,....drumroll please, 2000. It comes home to roost sooner, or later.

this imho just buttresses your other point though, that they cannot grow their way out.

 

[ekrem]

There's only 1 way forward:
The other €-countries have to downsize: Wages down, down with government spending and down with social benefit-payments. And you are back with a happy and healthy economy.
Cutting spending is not nice, but there is not another way to handle the situation. Germany has already gone through this process and still Germany itself doesn't .meet some parts of Maastricht criterias.

The Euro-Zone partners want Germany's money and German commitment to liability for other's debts. They want Germany to pay for Europe exceeding what it already pays through the cohesion policy to the underdeveloped regions surrounding it.

Just as it was planned in Versailles.

So your solution is to make people poorer? Does that include the rich and bankers? or is it just the lower and middle classes?

Real wages are stagnant in Germany for 10 years. There were painful reforms.
There's no reason why Germany should pay for other people's living standards.
Germans are biggest contributors to EU's funds, and are biggest shareholders of ECB which already is in debt to German CB more than 330 Billion € because Trichet (former French president of ECB) started to buy up the Siesta-Bonds from the South to save the French Banks.

If they want more, they'll all have to play by Germany's rules: Austerity.
It's simple as that.

 

[ekrem]

The euro as designed was destined to fail. The math and logic of it - despite the protestations of dreamy-eyed idealists - does not work. It is fundamentally flawed economically.

The € itself isn't "flawed economically", the problem is, that there is no institution and measures to punish the member-states who violate the Maastricht criterion (no more than 3% of GDP deficit, no more than 60% debt of GDP).
Once member-states are forced into complying to the criterion everything will be fine.
That's why Germany wants the contracts changed to introduce punitive measures.

 

[Toro]

The euro as designed was destined to fail. The math and logic of it - despite the protestations of dreamy-eyed idealists - does not work. It is fundamentally flawed economically.

The € itself isn't "flawed economically", the problem is, that there is no institution and measures to punish the member-states who violate the Maastricht criterion (no more than 3% of GDP deficit, no more than 60% debt of GDP).
Once member-states are forced into complying to the criterion everything will be fine.
That's why Germany wants the contracts changed to introduce punitive measures.

Not true.

It is true that the Maastricht Treaty has been shredded by the likes of France and Germany, but that's not the fundamental problem. The fundamental problem is that there is no mechanism to counter-balance economic pressures within the eurozone.

For a currency union to work, when one region is economically depressed and another reason is booming, there must be some transfer between regions. In a well-functioning currency union, labour would flow freely from the depressed region to the booming region, and/or money flowing from the booming region to the depressed region.

The EU has a free market in labour but in practice, there are significant cultural barriers to the mass movement of labour from one region to another. A third of Greece is not going to move to Germany for example. And apart from the CAP and some infrastructure spending, there isn't much in the way of transfers from the rich to the poor areas, at least not in the scale required. Social programs that could alleviate the depressed region are funded mainly by national governments, not from Brussels, when what is needed is for the Germans to fund the Spanish unemployed.

This is why the eurozone was destined to fail. Economically weak regions need to be subsidized by the strong areas. Or the economically weak areas have to become more productive and efficient. The problem is thus a political one, not an economic one. But you have to either convince the northern countries to subsidize the southern countries forever, or the southern countries have to become more like the north, which is highly unlikely.

 

[ekrem]

Not true.

It is true that the Maastricht Treaty has been shredded by the likes of France and Germany, but that's not the fundamental problem. The fundamental problem is that there is no mechanism to counter-balance economic pressures within the eurozone.

For a currency union to work, when one region is economically depressed and another reason is booming, there must be some transfer between regions. In a well-functioning currency union, labour would flow freely from the depressed region to the booming region, and/or money flowing from the booming region to the depressed region.

The EU has a free market in labour but in practice, there are significant cultural barriers to the mass movement of labour from one region to another. A third of Greece is not going to move to Germany for example. And apart from the CAP and some infrastructure spending, there isn't much in the way of transfers from the rich to the poor areas, at least not in the scale required. Social programs that could alleviate the depressed region are funded mainly by national governments, not from Brussels, when what is needed is for the Germans to fund the Spanish unemployed.

This is why the eurozone was destined to fail. Economically weak regions need to be subsidized by the strong areas. Or the economically weak areas have to become more productive and efficient. The problem is thus a political one, not an economic one. But you have to either convince the northern countries to subsidize the southern countries forever, or the southern countries have to become more like the north, which is highly unlikely.

The capital transfer is happening independent from € and EU has mechanisms (funds) to support poorer regions within the EU. Long before € was introduced.
It equals € 347 billion for current budget period of the EU.
Structural Funds and Cohesion Fund - Wikipedia, the free encyclopedia

German economy has been 2nd biggest capital exporter in world since 1990's after China. Only 24% of what has been generated in Germany has been reinvested in Germany. The rest went to foreign countries, also to the southern EU countries. Germany had the 2nd lowest growth within the EU since 90's and between 1998-2005 wages in Germany decreased in relation to the EU by 18%. The wages didn't really decrease but the wages elsewhere in EU skyrocketed.
Source is from IFO, which makes tax estimates for German Finance Ministry for next fiscal years.

In the meantime, Germany introduced some very painfully reforms and catapulted a 2-3rd world country (East-Germany) into a situation where infrastructure is even better than in West-Germany.
Countries like Greece meanwhile were on a big siesta could refinance with much lower costs on the markets (€) and overplayed (debt) by continuously violating the stability pact (Maastricht).
Now they're bankrupt, money is re-entering Germany with very positive effects (lowest unemployment since re-union with East-G.) and now those unproductive countries call for bailouts, Eurobonds.

I live in Germany and there is strong opposition to such kind of adventures and people think, that the other countries should go into austerity and make reforms, just like Germany did.
It is clear, that the German economic-system is one of most successful if not most successful in whole Western world. Like in evolution the fittest survive and there's no reason to continue uncompetitive habits and systems - and clearly not bailing them out for them to continue the same way.

 

[ekrem]

The average Italian is wealthier than the average German.
They should tax their people, they don't need bailouts or securities from Germany.

 

[ekrem]

Or the economically weak areas have to become more productive and efficient.

That's what has to happen or they'll have to leave €-zone once the crisis doesn't represent anymore a fundamental threat. There can not be always chieftains, but there also have to be normal Indians. Like in USA where there are states who do well and states who do not so well.

At some point the crisis will be defused by introducing a form of Eurobond-light where Germany will give guarantees for other' country's debts, but only after Germany's demands are met and political weight of EU has been relocated from Brussels to Berlin, like it always should've been.
Can not be, that an EU Commission President who himself contributed to Portugal's debt-crisis when he was that country's Prime Minister tells Germany what to do and demands unconditional guarantees and cash-flow.

At the end of the crisis the EU's political system will resemble the EU's economic structure, where Germany is the heavyweight.
The USA also isn't making a currency-zone with S.America and gives Trinidad and Tobago the same political weight within that currency-zone and freedom to do as it wishes with the debt-situation.

So you shouldn't declare the € dead. It isn't and won't die.
Germany has no intention to depart or let the € fall. The crisis also profits indirectly Germany as money re-enters Germany and there are elections in 2013.
Germany has them all by the balls, and they now have a little time to adapt to the reality and then situation will move on and crisis will be defused.