> There is no doubt that the European Economy is in bad shape,
> but ‘collapse in the Euro’ is a bit fantastical, and also a
> bit ambiguous.
[...]
> The Euro will no more ‘fail’ that the dollar will ‘fail’.
Like I said, I hope you're right, but there's nothing ambiguous about what is being discussed here. It is precisely the idea that one more more current participants will drop out and create new soverign currencies, potentially leading to France and Germany doing likewise.
> There is no way that the Eurozone participants could return
> to their national currencies, which just don’t exist anymore.
Many have also pointed out that this would not be a "return" -- but it's more than likely that any new currency that Greece makes lawful would be called "Drachma" ... and Franc and Deutschemark would follow.
> How would it make sense to try to found a new currency precisely
> at the point that your economy was screwed?
Well, other than the fact that almost every time it has happened this has been the case; it's only the Euro in recent-ish history that was founded when the economy *wasn't* screwed.
> What would you back the currency with? And why would Greece’s
> debtors think that was a good idea?
The usual answers to these questions are: future GDP; and: they have no choice.
/jordan