Dollar, Euro, Yuan in Thrilling Race to the Bottom

With Portugal asking to go on the ECB dole, is the euro doomed? Maybe not, says Wolfgang Münchau:

As long as there’s no bank resolution — one that disentangles national debt from the financial sector’s problems — the European crisis will continue until a cascade of national defaults becomes inevitable. It’s true that cleaning up the banking sector will be costly and unpopular, but it need not be crippling for the eurozone as a whole. Even my maximum estimate of a bank recapitalization costing some €500 billion is still less than 10 percent of the eurozone’s total GDP. This should be manageable — on aggregate — since the eurozone has a lower debt-to-GDP ratio than both the United Kingdom and the United States. But it might not be manageable for each individual country to handle its share of recapitalization costs. That’s why the banking crisis will inevitably have to be solved through the cooperation of all the countries that use the euro.

Then again, you have to believe Europe has developed a lot more political will since the crisis first hit in 2008 — and there’s precious little evidence of that.