I was invited recently to an economic symposium, and one of the questions was `What market related event do you fear might happen in the next 18 months or so`? An interesting question!

Although there were only about 25 invitees, there were many different scenarios put forward. All were understandable, some predictable: a break-up of the Euro; emerging market collapses; escalating middle-east tensions; the decline of the dollar as a major reserve currency etc. Two attendees (from different Hedge Funds) put forward a rather more intriguing scenario, their fear was that the Euro would NOT break up!

The concern was based on the premise that the Euro was the problem in Europe and not the answer, and a break up sooner rather than later would be preferable to years of low growth and in-fighting. I won`t go through all the reasoning behind this view, but lack of competitiveness was certainly in there somewhere. The discussion was brought to my mind by last week`s Fed induced $ weakness, which took the single currency towards its 2013 high of 1.3650.

There have been many attempts to ascribe a number to the potential overvaluation of the Euro as applied to countries such as Italy, Spain and Greece – the percentage is arguable, but there is no dissent as to the truth of the statement – and the continued strength of the Euro doesn`t exactly help this situation. So be aware of verbal intervention – expect some Euroland dissatisfaction about the current value of the single currency to be aired in this coming week.

Now that `Mutti`, as she is known in Germany, or `The Queen of Austerity`, as she is known in Greece, has been re-elected, there is a clear mandate for her to continue work towards consolidation of the European project. With the ECB taking immediate post election steps towards Europe-wide bank harmonisation, by attempting to unify accounting rules, the next set of difficulties will undoubtedly emerge shortly. There are many other very difficult technical issues to confront that may even require treaty change, but make no mistake, Mrs Merkel`s whole Chancellorship will be defined by her success in the European project and the Euro.

4 more years….Angie Baby, you`re a special lady. Living in a land of make believe? Well maybe…..