EUObserver: A Citigroup note to clients has warned that the eurozone is likely to fall apart unless the European Union’s member states fuse both on the fiscal and political level.
“Europe needs to stand up and decide if it is going to be a ‘United States of Europe’ or a ‘patchwork quilt’ of independent states,” reads a note by Tom Fitzpatrick, chief technical analyst at Citigroup in New York, first seen by Bloomberg.
The financial services firm, the largest in the world and one of America’s big four banks, says that if such integration is not on the cards, the euro area is “doomed” even if the current Greek crisis is resolved.
“Without a preparedness amongst the major nations – Germany in particular – to head in this direction, we fear that the euro as a common and expanding single currency will inevitably be doomed,” the analysis continued.
In February this year, hedge fund wizard George Soros also warned the eurozone was bound to break up without fiscal union.
“A makeshift assistance should be enough for Greece, but that leaves Spain, Italy, Portugal and Ireland. Together they constitute too large of a portion of the Euroland to he helped in this way…The survival of Greece would still leave the future of the Euro in question,” he told the Financial Times.
“The construction is patently flawed. A fully fledged currency requires both a central bank and a treasury. The treasury need not be used to tax citizens on an everyday basis, but it needs to be available in times of crisis,” he said. “When the financial system is in danger of collapsing, the central bank can provide liquidity, but only a treasury can deal with problems of solvency.”
“This is a well-known fact that should have been clear to everyone involved in the creation of the euro.”
The euro has slid 6.1 percent against the US dollar this year.