This brings me to the seemingly impossible scenario that could suddenly be inevitable. It may turn out that the key to the euro's future will be Germany's voluntary withdrawal. This seemingly fantastical idea could gain credibility for two
reasons.

First, a German exit would be much less disruptive than a Greek expulsion, because it would not trigger bank runs in countries remaining within the single currency, all of which would automatically devalue against Germany at the same moment, leaving Portuguese savers with no more incentive to shift their money to Germany than they now have to exchange their euros for Swiss francs, US dollars or Japanese yen. If Germany left, the Netherlands and Austria would certainly follow, but the other countries could remain in a French-led single currency that would be drastically devalued and could be run on less austere Mediterranean principles.

Second, and more importantly, deep splits over the euro have begun to emerge among the German political and financial elites. This mention of elites is deliberate because the German people have always been unhappy about the euro, but popular pressure alone would never be enough to break the integrationist instincts of the main political parties, especially when coupled with the interests of German exporters, for whom the euro has been a boon. In the past few weeks, however, a new power that could overwhelm establishment politicians and business leaders has suddenly appeared -- the country's most respected and politically independent institution, the Bundesbank.

The most dangerous event of the summer for the euro was not the failure of the Greek austerity programme, the ambivalent judgment of the German Constitutional Court or the defeat of Angela Merkel in recent elections. It was the resignation last Friday of Jürgen Stark, the German appointee to the ECB Council and the former vice-president of the Bundesbank. He walked out after being outvoted over ECB support for Italy and Spain. His protest came after the resignation of Axel Weber, the Bundesbank President, in February for exactly the same reason.

David Fuller's view I found this fanciful but given the seriousness of the European sovereign debt crisis, I forwarded the column to a German economist and old friend, Erwin Grandinger, whose views have appeared in Fullermoney on occasion over the years. He kindly replied and here is the 'business portion of his email:

"I think a major element of the Anglo-Saxon (financial) culture is to think along the lines of "conspiracy theories". And of course everything Kaletsky writes fits perfectly well into the world of The Times readers. Unfortunately nothing he writes has anything to do with proper on the ground economic / political research. If Kaletsky had just spent one day in Berlin and/or Frankfurt with senior business leaders or movers and shakers in the political arena he would have quickly come to the conclusion that his speculative view of the Germans and the euro is nothing but hot air.

"However, I do admit that if you compete in the world of major financial research firms, you need good public exposure. The more hype the better. Why not to create a funny thesis everybody and his dog can talk about? No falsification or verification required. So, it is a nice PR stunt that suits the readers of The Times and potential clients of Kaletzky's "research" (which can be excellent from time to time, don't get me wrong), but unfortunately it has nothing to do with (this German) reality. Still, it is good entertainment...

"And, as you often say, we can only deal with one reality... which is reflected in the charts. So, instead of participating in the "Keynes beauty contest" (major problem among economists), one should better focus on acquiring informed opinion by actually talking to the decision makers... (at least that's my business). I admit that this can be difficult and irritating from time to time, but it also gives you an excellent impression about what is seriously going on behind the scenes."

My comment - Interestingly, a short while ago Eoin received a similar reassurance on Germany's commitment to the euro from an economist friend of his who works for the European Central Bank in Frankfurt, and often spends half his day at the Bundesbank on the opposite side of the street.

I think we can forget about Germany pulling out of the euro. I also maintain that the euro will survive for so long as Germany wishes to remain in a European single currency.

This is very important for subscribers - assuming you agree, because many people are questioning the euro's survival as never before. Consequently, fear of a euro collapse is baked into stock markets around the globe and not least in Europe.

I have recently said that finding the path for resolving Europe's sovereign debt crisis must feel like crossing the Somme under fire. Nevertheless, I think we can assume that this euro crisis will be contained. The initial evidence that more investors are beginning to reach the same conclusion is a likely factor behind this week's stock market rally.

(See also Eoin's chart comments below.)