Lars Christensen, co-chief executive of Denmark's Saxo Bank, said the euro's recent rally is illusory and the shared currency is set to fail because the continent hasn't supported it with a fiscal union.
"The whole thing is doomed," Mr Christensen said yesterday in an interview at the bank's Dubai office. "Right now we're in one of those fake solutions where people think that the problem is contained or being addressed, which it isn't at all."
The euro has gained 8.2 per cent versus the dollar in the past six months and reached as high as $1.3711 on February 1, the strongest since November 14, 2011. The European Central Bank forecasts the euro-area economy will shrink 0.3 per cent this year and ECB President Mario Draghi said on February 7 that the currency's gains pose a risk for growth and inflation.
While the euro has strengthened, the economies of Germany, France and Italy all shrank more than estimated in the fourth quarter. Ministers from the 17-member euro area met during the week to discuss aid to Cyprus and Greece as a tightening election contest in Italy and a political scandal in Spain threaten to reignite the region's debt crisis.
"I'd be a bigger seller of the euro at anything near 1.4," according to Christensen, who said he isn't making any speculative bets against the currency.
The euro declined 0.1 per cent to 1.3343 against the dollar, falling for a fourth day.
France is grappling with shrinking investment, job cuts by companies such as Renault and pressure from European partners to speed budget cuts. While Germany expanded 0.7 per cent last year, France posted no growth and Italy probably contracted more than 2 per cent, the weakest in the euro area after Greece and Portugal, according to the European Commission.
The economy is on the brink of its third recession in four years and the highest joblessness since 1998. Prime Minister Jean-Marc Ayrault said on February 13 the country won't make its budget-deficit target of 3 per cent of gross domestic product this year as the economy fails to generate growth and taxes.
"Another possible fallout is getting rid of some of the countries that are being ruined by being in the euro, notably the southern European economies," Mr Christensen said. "People have been dramatically underestimating the problems the French are going to get from this. Once the French get into a full-scale crisis, it's over. Even the Germans cannot pay for that one and probably will not."
Spanish and Italian bonds rose last week as debt sales allayed concern the nations may struggle to raise funds before Italy goes to the polls to elect a new prime minister. Yields on Spain's 10-year bonds fell for the first week in five as European Central Bank President Mario Draghi said the country had achieved "enormous progress" in its reforms. The spread between Spanish 10-year bonds and comparable German securities decreased two basis points to 354 basis points.
"It's the political world that has been extremely supportive of the euro, not for economic reasons but for political reasons," said Christensen, a long-time critic of the single currency and who now lives in Switzerland.
TPG Capital, the private equity firm started by David Bonderman, bought a 30 per cent stake in Saxo Bank in August 2011 for about $560 million. Christensen and co-founder and co-cheif executive Kim Fournais maintain majority ownership of the company.
The Hellerup, Denmark-based bank said in August that first half profit dropped to 44 million kroner ($7.8 million) from 346 million kroner a year earlier.