Without such a federation, can the single currency survive, I asked Helmut Schlesinger, another influential central banker who has seen the odd financial crisis at close quarters and was president of the Bundesbank when sterling was forced out of the European Exchange Rate Mechanism in 1992.

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Hedge funds have come under heavy fire since George Soros forced sterling out of Europe's exchange-rate mechanism in 1992.

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Sterling was in crisis and Norman Lamont was forced to announce a humiliating withdrawal from the European Exchange Rate Mechanism.

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The region is forced to acquire dollar assets in order to avoid exchange-rate appreciation and deflation.

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Indeed, a forced devaluation may do much more harm to investor confidence than continuous exchange-rate fluctuations.

ECONOMIST: Exchange rates

George Soros, for example, famously bet against the pound and forced the British government to abandon its membership of Europe's exchange-rate mechanism in September 1992.

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