[Salman]

The upward drift of the Euro seems to have begun when the French and German currencies where phased out a few months ago. Could the Euro's strength be derived from the strength of the former Deutschmark? One strong economy could drag the rest along.

Absolutely. The Euro is Deutschemark lite. In effect, the Deutschemark was slightly inflated and the Eurozone adopted it. A fiscal mess up by (for example) Italy, or the admission to EU membership for political reasons of (for example) Poland could devalue it.

A more likely scenario for the Euro devaluation is some major member pulling out over economic regulations not directly related to the currency. Like Brussels trying to dictate the composition of German sausages or French wines. Hell, they even regulate stuff like the shape of bananas, but that doesn't directly impact one member over another.

[walden]

I guess that central bank lending rates are set (and money supply managed) by EU people in Brussels? How does that work? Seems like it might work fine as long as things are good, but if any of the major countries were disproportionately affected by a recession, there could be trouble. Were they at least smart enough to let the Bundesbank people take over the central banking, or did they let the French (or, God forbid, the Italians) do it?