Why has the euro been plunging against the dollar and the yen? Why are European banks coming under renewed pressure in spite of massive rescue programmes?

The euro has been falling because investors, in their scramble for safety and liquidity, are flocking to US – and to an extent also Japanese – government paper, driving their yields close to zero. US and Japanese paper is considered safer than other government-backed assets – including public debt instruments issued by European governments. In other words, the separate markets for sovereign debt paper of unequal quality issued by European governments cannot compete with the US market for financial flows in search of a safe harbour; and they will not be able to compete in times of turbulence until the European Union develops a unified market for bonds denominated in euros .