For France and for the euro system as a whole, the best strategy is to dismantle the monetary union from the top -- via the exit of Germany and the other most competitive countries. Appreciation of the new German currency would improve the deficit countries' trade balances.

In some cases, debt write-offs would still be necessary, but the scale of reduction and the cost to creditors would be smaller because the monetary dismantling would boost the deficit countries' growth. The surplus countries would have to recapitalize their banks after losses due to any debt reduction, so exiting the system doesn't mean abandoning the crisis countries. The difference is that, after the exits, their assistance would help put the deficit countries on a recovery path, whereas the current bailouts lead only to a dead end.

The European Central Bank would have to strive to maintain credibility and trust during any controlled dismantling of the euro system. The ECB could be preserved, at least for some time, as the central bank responsible for monetary policy in all 17 member countries, even after some had replaced the euro with new currencies.

This would facilitate strong policy coordination among the former members and demonstrate that the segmentation was an orderly transformation carried out under the control of the most respected and credible European institution.

Many observers concede that the euro was a mistake but think there's no going back. They reckon that dissolving the monetary union would lead to economic chaos, first in Europe, and then around the world. European leaders are afraid that backtracking on the euro project would also be a lethal blow to the larger cause of European integration and could be the beginning of the end of the EU and the single market. These fears give rise to what we regard as the disastrous strategy of defending the euro at all costs.

Although a controlled segmentation of the euro system through the exit of the most competitive countries would actually be the most effective way to help the deficit countries, it could still be seen as a decision by the strong to abandon the weak. Europe's history makes it difficult for Germany's leaders to initiate such a move.

David Fuller's view Veteran subscribers may recall that I favoured retention of the European Free Trade Association, to preserve peace and promote economic growth within Europe, long before the single currency was launched. Currency unions, formed by aligned countries which wish to remain independent, have had a difficult history.

Predictably, the euro has not avoided similar problems. It was the triumph of ego and naivety, rather than common sense. It has also compromised democracy within modern Europe. Worse still, it has revived historic enmities among ancient civilisations.

Nevertheless, I have also maintained that the euro would survive, if that is what most Europeans actually want. Today, European governments still proclaim their commitment to the euro, publicly, but this has an increasingly hollow ring. Few European politicians would test this resolve with a 'yes or no' referendum on whether or not their citizens favour remaining within the single currency.

Obviously, the single currency would be less contentious if Europe's economic performance improved. It could, and should, as Europe has moved somewhat closer to fiscal union. Mario Draghi's ECB has been very effective in lowering interest rates among Europe's countries with deficit problems. This has bought time but the ECB does not have the mandate to institute pro-growth policies.