The theme I highlighted in the daily post on Friday seems to be everywhere today, namely the United States of Europe and Britain’s inability to go along with such a concept. Angela Merkel keeps telling us she wants “more Europe”. And of course that will mean less national sovereignty. In truth, this is the only way Europe can work because you need more instituional structures than just a central bank to deal with the troughs of economic cycles, as we are now seeing, with half of the euro zone (including Portugal, Italy, Ireland, Spain, Slovenia, Greece, and Cyprus) in need of bailouts or support.
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Could an EU breakup happen? I don’t believe it will happen because there is no advantage to this. Britain will stay in. But a breakup is something to keep in the back of your mind as an outlier scenario.