The main psychological factor in the currency market remains the trend for participants to hold euros based on their view that it is impossible to see how European leaders could proceed with the dissolution of the euro. The resulting mess would overwhelm national currencies and central banks. The door would be thrown open to competing monetary policies, competitive devaluations, protectionism and an end to the EU's free trade and capital zone. How would ex-eurozone countries service their debt, all of it euro-denominated? If they defaulted, either by depreciating their new national currencies or inflation, they would cut themselves off from new credit from the international financial system, as happened to Argentina.


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