Hans Olaf-Henkel, the former head of the Federation of German Industries (BDI) who has joined about 50 other business leaders in a legal challenge at Germany’s Constitutional Court against the Greece rescue package, wrote an opinion piece for the FT where he calls for a European hard core – Austria, Finland, Germany and the Netherlands – to break away from the Euro.

This is essentially the same idea as the indecent proposal posted here last month and is also similar to other indecent proposals which I reported on. In summary, my indecent proposal called for offsetting the necessary fiscal austerity with external flexibility (splitting up the Euro into a Northern Euro and a Southern Euro), accompanied by true monetary liquidity (unavoidable mass writedowns and recapitalizations of European banks). Incidentally, the second leg of the indecent proposal was just prescribed by IMF Managing Director Christine Lagarde, leading to extensive gnashing of teeth among Eurocracy elites as reported by the FT two days ago.

What is interesting in this latest call to abandon the current failed strategy (basically, Plan A = “defend the Euro at all costs”) is that Mr Olaf-Henkel was an early supporter of the Euro who changed his mind when facts changed. He is not a told-you-so grave dancer and this greatly increases the weight of what he has to say.

What drove Mr Olaf-Henkel to call his early support of the single currency as “the biggest mistake of his professional life”? Here is what he had to say:

I have three reasons for my change of heart. First, politicians broke all promises of the Maastricht treaty. Not only was Greece let into the eurozone for political reasons, also the fundamental rule, “no member to exceed its yearly budget deficit by the equivalent of 3 per cent of gross domestic product”, was broken more than a hundred times. Mandatory punitive charges were never applied. To top it all: the “no bail-out” clause was wiped out in the wake of the first Greek rescue package.

Second, the “one-size-fits-all” euro has turned out to be a “one-size-fits-none” currency. With access to interest rates at much lower German levels, Greek politicians were able to pile up huge debts. The Bank of Spain watched the build-up of a real-estate bubble without being able to raise interest rates. Deprived of the ability to devalue, countries in the “south” lost their competitiveness.

Third, instead of uniting Europe, the euro increases friction. Students in Athens, the unemployed in Lisbon and protesters in Madrid not only complain about national austerity measures, they protest against Angela Merkel, the German chancellor. Moreover, the euro widens the rift between countries with the euro and those without. Of course Romania would love to join, but does anybody believe Britain or Sweden will find it attractive to join a “transfer union”? Meanwhile, dissatisfaction with the euro drags down the acceptance of the EU itself.

Back in November 2010, in the post titled The Eurozone Endgame: Four Scenarios I wrote the following:

[the departure of Germany, Austria, Finland and the Netherlands from the Euro] is the only stable equilibrium outcome because it amounts to a correction of the basic design flaw afflicting the current Eurozone. Dividing Europe into two economic zones is better than disorderly disintegration. However, as Simon and Peter point out, the question is France. The loss of face involved, and the misgivings about the rupturing of the Franco-German bond that lies at the heart of the European construction, probably mean that politicians will exhaust all other options and allow significant damage to pile up, before this scenario is given a chance. On the other hand, newly assertive Germany can in theory do this without necessarily waiting for an answer from the French, if push comes to shove in the bond markets.

Ten months after I wrote this, clueless politicians are rapidly exhausting all options, significant damage has piled up, and push has come to shove in the bond markets.

The endgame is now very near. The only remaining questions are as to the exact form and timing that it will take.