Sean O'Grady: Euro safe until Germany's angst exceeds its altruism

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On the spectrum of possibilities, the one thing that is least likely to happen to the euro is that it quickly becomes the world's new reserve currency, whatever the Chinese might like.

Yet it is not so long ago that the euro was regarded as a safe haven, when Wall Street was melting down after the Lehman collapse in the autumn of 2008, and America's financial supremacy seemed over for good. For the prestige of the euro to be restored to that sort of level would take a radical reform so far ruled out – the pooling of all eurozone sovereign debts and a common fiscal policy. It's politically impossible today, but as an alternative to a break-up it might become more palatable. Longer term, more fiscal co-ordination seems inevitable, if only because of the "strings" attached to rescue packages.

A Greek default is on the other extreme; a racing cert according to the credit default swaps market. It might resolve the situation . Then again, it might trigger a series of defaults across the peripheral economies – contagion. Either way, Greek tax revenues cannot grow fast enough to service her national debt, a permanent source of euro-wide instability.

Almost certain – if the euro makes it to 2013 – is a reform of the current rescue procedures. This will see sovereign nations be treated more like busted private companies, with bondholders being obliged to take a share of the risk of default before other eurozone partners have to launch a rescue. Such a plan, effective for debt issued after 2013, is likely, but it would not on its own address the divergence in competitiveness between Germany, in particular, and the peripheral nations that is the source of much of the continuing strain in the single currency.

A break-up of the eurozone seems unthinkable but it is really a function of the will of the German government and the German people to put the European ideal ahead of their own narrow financial interests. Supporting the euro may one day be beyond even Germany's resources.