for debtors in the weaker economies to default as they could continue to service euro liabilities in euros as their home currency. Which of these two processes was followed would make a big difference to how the euro performed on the exchanges. For if the weak countries left, the euro would be the currency of the strong northern core. It would surely rise on the foreign exchanges. By contrast, if the strong countries left, to forge their own, new currency, the euro would be the currency of the weaker southern countries. It would surely fall on the exchanges. The uncertainty as to which of these might happen is one reason why the existing euro has not been weaker on the exchanges. In fact, whichever countries decided to stay together in a northern monetary union, it is not obvious that the peripheral economies should remain together in a southern union. We tend to lump them together under the unflattering acronym PIIGS, but in fact they are all very different, and they have only limited levels of trade with each other. They would be better off being able to set their own domestic policies and allowing their exchange rates to float. Moreover, however attractive a German exit might be, it looks unlikely. Germany and other core countries are not (yet) prepared to make this leap. So, in practice, if the euro is to be reconfigured, it looks as though it will be through the departure of the weaker southern members, one by