Will Euro Union be ending soon?

European Union as an economic and political power, despite being heavily a Christian Society that is the soft part of the union that weakens, mostly rely on EURO itself.  A currency may have that much of political, economical and prestigious power is very rare.

Not far from today, no wise technical or fundamental analyst may propose that Euro may end and the Euro Union may dissolve.  However as of the end of 2011 people has started to talk even discuss on this issue seriously.  From a specific point of view that I will explain later, this issue is not an assumption but a serious threat for EU.

As we all know the main sponsor and guarantor of EU and EURO was and is Germany, France and Italy.  BUBA (Bundesbank) is the main financing entity for ECB( European Central Bank) and all individual central banks through Target2 ( The union settlement system).  When EU has been formed and operate normally and successfully the balance sheets and accordingly the balances of the contributions were normalized.  Right after 2007; causing from the financial sector crisis and credit problems raised from the lack of liquidity; BUBA became the largest provider and sponsor of the system through Target2.  As of today BUBA has receivable under name of claims from the ECB and indirectly from all EU member central banks over 490 billion Euros.  Only Luxembourg, Holland and Germany are in the form of providers to EU claim system. This amount is 60% over of the federal budget of Germany.

Now the tricky point comes.  There is no definite regulation or methodology on the coverage of losses if the central banks of the other members declares un-ability to pay.  In written there are contribution levels of each country to the losses of the ECB.  i.e. Germany's share is 28%.  That is funnily means that if the other countries defaulted then Germany must accept to loose 28% of her receivables through Target2. 

However this scenario is unfortunately the optimistic one.  Everyone is keeping silent and does not want to mention if the other countries and central banks claims NO PAY or BUBA decides to stop financing and says it is ENOUGH.

Then the consequences are unknown but not positive for sure.  If the crisis in Greece, Ireland, Portugal and Spain will extend and the one in Italy can not recover; it will not be an unwise thought to discuss dissolve of EURO Union.  The next step will be discussion on EU without the most powerful political and economical weapon in hand, the EURO.