Why is it not the end of the world if an American city or county defaults on its debt (I know about the famous cases of Cleveland, OH and Orange County, CA - has a state ever defaulted on its debt?) and the fact that a smallish EMU country would default on its debt is supposed to spell the end of the EMU? A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith
Whereas all european states had their own currencies 10 years ago, where often master at competitive devaluation, and they really, really are not used to receiving orders at the point of a gun. The establishment in each country will not "let go": they will refuse to default (that would be acknowledging failure), and they will print, claiming that the EMU is the problem, not the solution. Game over (for them, at least)
Of course, the EMU will not die: it will just loose smaller members, one after the other. There will still be a cross-border currency, only cross fewer borders, between more homogeneous, highly industrial economies with older demographics.
BTW, the collapse of Hypo (and probably Deutsche Bank soon) tells me all I need to know about the German policy: Merkel told everyone to save his own ass, cos' she'd figured she's so deep in the shit that rescueing german institutions will cost about the same as another reunification with east-deutsche-mark parity !
Minor EMU economies are totally toast. My aunt comes from back from vacations in Greece (she goes there every summer) and told me she saw a disaster, with one of every two shop walled off. Anyone here with some comparable firsthand experience ? Pierre
