Norton

I believe the Euro is by far more vulnerable than the dollar. This from a blog but brings up some interesting points.

"Flaws in the structure of the EMU

(1) The US dollar, like most currencies, was issued as a result of nation-building. The Euro was issued as a step towards nation-building. The European Union is not yet a state in the full sense of the term. Its other flaws from this this. The member states control their own fiscal policy. More important, the member states see themselves as distinct states. Differential growth in Georgia and California does not create pressure to break up the Union (not since 1860).
(2) The EMU is a monetary zone. Unfortunately one interest rate cannot work for every “part” of the EMU. Esp those with different economic and social structures, like Germany and Italy. That is not terminal during a boom, but might be during a recession. Like the one perhaps starting now. The governors of the European Central Bank follow the tradition of the German Central Bank: fighting inflation is the first and only goal. That works for a strong, stable economy like Germany. High rates during a downturn might prove too much for Italy to bear giving Italy two choices both with ugly consequences. Leaving or staying in the EMU.
(3) The dream was that a strong currency would create competitive disinflation like that Germany experienced during the years after the Bretton Woods system crashed in 1971. A strong currency forces industrial and labor market restructuring in order to stay competitive. If this does not occur — and there are few signs of this — then the likely result is slow growth and inflation plus widening divergences between the EMU’s member states. In which case the pressure on the EMU could become intolerable during a recession."


Can the European Monetary Union survive the next recession? « Fabius Maximus

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Woodrow Wilson