Deluard lists the ingredients of a sovereign debt crisis: high debt, a large primary deficit, foreign financing, no printable currency, weak growth, unpopular politicians, and no ability to raise taxes or cut spending. France hits every marker, he says, with a particularly bad gap between interest costs and nominal growth.

Unlike Japan, which allowed currency devaluation to defend its export share, Europe is hampered by the ECB's strict price-stability mandate and Germany's balanced-budget fiscal stance. Lacking domestic AI drivers and saddled with elevated energy costs, Germany has lost global export competitiveness to Japan, resulting in a persistent post-COVID rise in corporate bankruptcies.

While Japan executed a smooth, coordinated currency devaluation, Europe lacks the political unity and first-mover advantage. The Euro's decline will likely be a messy process, triggered by a series of political and debt crises rather than proactive policy.

Any strength in the Euro from a hawkish European Central Bank is unlikely to last. The Eurozone's weak fundamentals—lagging growth, poor equity returns versus the US, and energy price vulnerability—mean that higher interest rates would further stifle the economy, making any rate-driven rally unsustainable and positioning the Euro as a funding currency.

During a global energy and food crisis, Europe effectively behaves like a large, import-dependent emerging market. This creates a direct terms-of-trade shock. The EURUSD currency pair offers a direct and highly liquid way to express this negative macro view.

The Euro was created with monetary union first, assuming political and fiscal union would follow; they haven't. Now, with nationalist governments rising across Europe, the project's core conflict is exposed. A shared currency managed by inwardly-focused national interests is a fundamentally unstable structure.

Facing similar demographic and deflationary pressures as Japan a decade ago, Europe will be forced to debase the Euro. This is the only remaining viable policy tool to stimulate tax growth faster than social spending obligations.

French 10-year yields have widened to around 150 basis points over German Bunds, touching levels reminiscent of the 2011 European sovereign debt crisis. Because France faces heavy 5% to 6% budget deficits and potential fiscal austerity under Maastricht Treaty limits, tight monetary policy risks fracturing the eurozone, creating severe macro risks that equity markets have yet to fully price.

Despite a robust domestic growth story, the Euro is unattractive because US growth is also resilient, other global regions have stronger growth revisions, and the Euro's negative carry and overvaluation relative to energy prices make it a poor investment.