More than a few expensive minds have turned their attention to the possibility and how to cope with it.

Rodney Smith

Independent Strategy analyst Bob McKee forecasts not so much a glitch as a possibly swift reversal in the euro/dollar rate in the weeks ahead.

Specifically, he thinks that European bankers, supported by European politicians, will be eager to see the euro rate slip towards 1.10 to the dollar.

That could give some relief to a broad European economy desperately putting on a smile for the euro while hurting internally from high unemployment and low and slowing growth.

Jeremiah of the first day of euro trading was Bank of England deputy governor David Clementi. He told the Reuters news agency that misdirected euro payments were almost inevitable, and that would mean costly bank mistakes.

Mr Clementi was only being realistic, echoing what every banker and broker knows in his or her heart.

Mistakes inevitable?

However there is a view that Europe's thousands of banks and other institutions are bound to make mistakes sooner or later. With transactions running at billions of marks, francs, dollars, yen and the rest, it would be inhuman for there not to be errors of some sort.

Most will probably be small enough to be cleaned up and covered over easily. Others could dribble out as disruptions in the regular flow of business.

In the unlikely event of a bank running out of cash - suffering a liquidity crisis - the responsibility to sort things out would probably fall on the European Central Bank (ECB). It would be expected to provide liquidity.

This need not be as blunt as a cut in official interest rates; the banking system does have some subtle short term borrowing and lending facilities.

In Japan, for example, the central bank offers a call rate below the official discount rate to provide extra liquidity under pressure.

However, the ECB's critics fear a liquidity crisis might be a test too far. Some, like Europe's own Centre for Economic Policy Research, say it is not designed to create liquidity in crisis - a condition which is exacerbated, they say, by the conflicting views of 11 national governors.

Will unity stick?

Although the governors managed a concerted interest rate cut a month ago, that cohesion could be sorely tested under pressure.

Some governors (read, national central bankers) could try to take a free ride, in the hope that the necessary changes are achieved by the actions of other members.

There is also, says the CEPR, no clear line of responsibility in crisis management. The solution, it says, would be to give more responsibility to the ECB. But that would mean that any threat to the European banking system in the weeks ahead could lead, not to the ECB being weakened, but to greater centralisation.

Even the positive Professor Walter at Deutschebank admits there are bound to be some mistakes.