The two biggest threats to the EURO are
(1) the persistent divergence in the trade balances among the Eurozone partners which lack balance-of-payments adjustment mechanisms and
(2) the co-mingling of risk among local and cross border depositors no longer distinguished by the currency of denomination.
When the corner shopkeeper faces the same risks in his local bank deposits as do the speculative investors from the other side of the continent who move millions at the speed of a click, we are on very thin ice indeed.
Leave it to Iceland, to see the danger and to do what urgently needs to be done elsewhere.
If the Single Currency is to be saved.
"Here is a lesson from Iceland. In October 2008 the Icelandic government acted on a bank run by forcing the dysfunctional banks, by then lacking liquidity, into receivership, splitting their operation in two. Instead of the classic split into a good bank/bad bank the domestic operations were consolidated in a New bank with the foreign operations left in the estate of the Old failed bank; in effect a split into a good domestic bank and a bad foreign one. Some weeks later, capital controls were put in place, forcing investors to stay put and shoulder the risk.