I DO not believe that the euro will break apart. Monetary unions very rarely break up - the process is economically, socially and politically traumatic. A break-up of the euro would be considerably more painful than the break-up of a fixed exchange rate regime. However, if the euro ceases to exist, holding euro cash or bank deposits in Germany is unlikely to provide the safe haven some investors believe.

Every monetary union break-up in the 20th century was preceded by dramatic capital movement; monetary union break-ups are driven by bank runs, not politicians. Money moved into the economy that investors believed to be strongest.

The Austro-Hungarian break-up of the 1920s saw money move to Hungary. The United States break-up of 1932 saw money move to New York. The Czechoslovakia break-up of 1993 saw money move to the Czech Republic. If the euro broke apart, money would almost certainly move to Germany.