French Bank: Euro Collapse 'Inevitable'

The euro, already under pressure, came under renewed attack Monday as a French bank speculated that the currency union would inevitably collapse.

Meanwhile, a former chief economist of the European Central Bank warned that a bailout for member country Greece could damage the euro's credibility.

Société Générale strategist Albert Edwards warned investors that any help given to Greece merely “delays the inevitable break-up of the euro zone,” while former European Central Bank Chief Economist Otmar Issing, in a Financial Times piece, said bailing out Greece would be a “major blow” to the currency.

“The viability of the whole framework — nothing less — is at stake,” wrote Issing.

“Financial assistance for countries that violated the terms of their participation in EMU would be a major blow for the credibility of the whole framework.”

The euro could sink to $1.3483 from its $1.5144 high in November, traders told the U.K. Daily Mail.

At issue are the terms of the pact that created the euro, which requires its members to maintain an annual budget deficit no higher than 3 percent of GDP and a national debt lower than 60 percent of GDP.

Greece is expected to hit 12.5 percent deficit in 2009 and debt of 72 percent by 2010 and 2011.

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