The Euro has had a habit recently of going on a high whenever there’s been yet another rescue plan that has been announced for Greece, and by implication Spain, Portugal and Italy. Today was no exception.  The Euro soared when the European finance ministers announced that the solvent countries were willing to go on the hook for insolvent countries’ debts.  It should be noted that this was after elections in both Britain and Germany were safely out of the way.  But is this euphoria or has a milestone been reached?  Obviously we don’t know but here are a few of our humble guesses.

There are two contradictory things going on behind the scenes with the Euro.  Firstly there is a move to “not waste a crisis” and to allow the Euro area to become more like a single European economic government.  Although it is hard to see a single economic government surviving in the long term with such massive contradictions and such popular unease, in the short to medium term this will strengthen the Euro as it will commandeer resources to help Greece and the other semi-bankrupt Mediterranean countries.

However there is a countervailing force that really should not be ignored.  The Europeans are incapable of agreeing anything that will actually do as it’s designed.  There are too many cavils, cheats and uncertainties.  Look what got the Euro into this situation, a wholesale fraud on the markets when Greece lied about how much debt it really had.  Look at how many “final” decisions have been made to backstop Greek debt, and how they unravel after two weeks.

This may end well for the Euro, but we can’t see it.  We hardly expect the Euro to have a Soviet style collapse, but the only question we can see is whether this is fatal or just very, very painful.