This is getting tiresome...but the panic is not as palpable as they think as OTM currency options on Euro futures are not as inexpensive as they "should" be given an imminent Euro collapse.
During the relatively benign economic conditions that marked the first decade of the euro, fast growing economies such as Spain were able to enjoy the advantages of currency union, such as low interest rates
, but allowed their prices and costs to gradually rise, leaving their economies uncompetitive by comparison with nations such as Germany. Traditionally, that cumulative build-up of cost and price differences would be dealt with by devaluation of the currency, but membership of the euro removes that flexibility. Thus Ireland, Greece , Spain and others are undergoing what economists euphemistically call "internal devaluation", slashing wages and costs and, if necessary, allowing unemployment to climb to record highs. The problem raised by the Nobel prize-winning economist Joseph Stiglitz among others, is that those deflationary polices threaten to shrink their economies even more, triggering an even more urgent budget crisis as tax revenues collapse and unemployment payments rise.
A further issue undermining the markets' confidence in the ability of these governments to deliver is the absence of any kind of Treasury-style function in the eurozone, to complement the European Central Bank: Cross-border bailouts were made illegal by the Maastricht Treaty and that rule has been carried over to the current Lisbon Treaty.
At the last summit of European leaders in Brussels, President Nicolas Sarkozy revived French demands for "European economic governance" to deal permanently with budget crises, in effect a eurozone Treasury department, but Chancellor Angela Merkel of Germany only agreed to such a development provided it involved all 27 EU states, effectively neutralising the French proposal and insulating the German public finances from possible contamination. Distressed nations such as Greece will probably be left with little choice but to approach the IMF for assistance – a humiliating defeat for those ambitious for European political and economic integration.