Montreal, Canada

Anyone following the EUR’s advent in 1999 knows his name. He’s as ubiquitous among European currency pundits as the Big Mac is to millions of people worldwide who consume the famous burger every single day.

Otmar Issing, one of the founding fathers of the European Monetary Union (EMU), just released an essay on the future of the single currency and is not optimistic about its viability.

Mr. Issing served as the European Central Bank’s first chief economist from 1998 to 2006 and is highly regarded in Germany and the rest of Europe on affairs pertaining to EMU.

Issing believes the weaker eurozone peripherals are engaged in a stealth “blackmail” of the more solvent and fiscally responsible core.

“The financial rescues of Greece and Ireland risk setting in motion an unstoppable momentum towards a transfer union, giving highly indebted countries the potential to blackmail more solid member states.”

The outcome, according to Issing, is growing political and economic tensions in the EMU, which ultimately might prove to be the death-knell for the single currency.

Mr. Issing represents the hardcore opinion of European Monetary Union. He also presided over the effective failure of its predecessor, the European Exchange Rate Mechanism (ERM) in September 1992, when the British pound and the Italian lira were devalued and subsequently left the single currency grid. ERM was a failure. Then, like now, it was impossible to set monetary policy for so many different economies. ERM drowned amid German calls for higher rates at a time when most of Europe was struggling with slow growth or recession.

Without fiscal union, it’s almost impossible for the single currency to survive in its current form. Issing is correct. There’s no way the Germans and the Dutch – the two largest EMU members with the biggest surpluses – will fork over endless sums of cash to the deadbeats.

If the EUR does survive in its current form, then it’s highly likely it will approach par value versus the American dollar. The EUR doesn’t belong at 1.30, 1.20 or even 1.15. In that scenario, bonds in the EMU will be horrible investments but regional stocks would thrive as exports boom.