While any single finance ministry would "not necessarily" administer "a large federal budget," it would "exert direct responsibilities in at least three domains," said Trichet, whose eight-year term ends in October.

They would include "first, the surveillance of both fiscal policies and competitiveness policies" and "direct responsibilities" for countries in fiscal distress, he said.

Ministry Functions
It would also carry out "all the typical responsibilities of the executive branches as regards the union's integrated financial sector, so as to accompany the full integration of financial services, and third, the representation of the union confederation in international financial institutions."

Eoin Treacy's view The Euro has been called a Frankenstein currency by skeptics because it has elements of a currency union in monetary affairs which are inadequately counter balanced with a wide degree of latitude in fiscal affairs for constituent countries. This has changed somewhat as the peripheral debt crisis has thrown into sharp relief the failure of an "honour system" with regard to fiscal rectitude. However, the areas of taxes, spending, borrowing etc. remain as thorny as ever particularly for those who value national sovereignty.

The absence of a central fiscal authority is the Euro's greatest Achilles heel and is where voter and investor concern is most acute. The agonizing over funding a bailout mechanism for Greece, Ireland and Portugal would be inconsequential if the EU had the power to levy taxes on a regional basis. Mr. Trichet is now only a few months from retirement so it costs him little to point out the glaringly obvious, but politically unpalatable truth, that a currency union without central fiscal authority is an unsatisfactory structure.

The current solution is to attempt to tread a middle ground where the member states agree to band together to bail out debtor nations and creditor banks in return for strict compliance with cost cutting and revenue raising targets. Given the levels of debt concerned, creditors can no more afford the repercussions of a default than debtors. This suggests that politicians have little choice but to continue to agree bailouts while also gaining concessions that can be sold to recalcitrant voters.

The Euro Trade Weighted Index has been ranging with an upward bias for much of the last year. It pulled back sharply from early May but found at least short-term support this week. The volatile nature of the range is likely to remain a feature as concerns over the Euro's debt issues ebb and flow relative to the USA's.

Against the Swiss France the Euro remains in a medium-term downtrend. Prior to this week, where it has been relatively steady, the currency fell for the previous five consecutive weeks. It is now oversold relative to the 200-day MA and has stabilized near the psychological CHF1.20. The SNB will not be particularly happy with the strength of the Franc and its overextension relative to the MA raises the potential for at least a short-term relief rally in favour of the Euro.