Euro tumbles as Asian funds shun EU chaos The central banks of East Asia, Russia, and the Gulf continued to buy eurozone bonds, diversifying a chunk of their $10 trillion foreign reserves away from the dollar. As the troubles escalated in Club Med they merely rotated into German, Dutch, and French debt, keeping the money in euros. At the same time, European banks have been repatriating funds from across the world in a frantic effort to shore defences at home. Athanasios Vamvakidis from Bank of America said they have slashed overseas assets by $4 trillion since 2008, switching a large chunk into euros. The ECB rates remained higher than in the US and the UK, acting as a magnet for funds. All the main supports are now falling away, opening a new phase of protracted weakness for the euro as the region battles a double-dip recession and break-up risk. Custodial iFlow data from BNY Mellon has picked up "sharp outflows" over recent days. Global investors have taken fright at the fractious disputes among EU leaders, moving funds into the Swiss franc, sterling, and the dollar. Finland's premier Jyrki Katainen said "the situation is dangerous, very dangerous. All countries are mentally preparing for the case where, for whatever reason, everything falls apart. Finland will not contribute to any more EMU rescues. Meanwhile Germany's top court has delayed the new bail-out fund (ESM), and Berlin has back-pedalled on the EU summit deal. The eurozone economy almost certainly contracted in the second quarter and faces deepening recession. Italy's industry federation said yesterday that the country's economy would shrink by 2.4pc this year "at best," warning that austerity was reducing the country to "social rubble." Traders are betting that the ECB will have to loosen monetary policy yet further and ultimately print money (QE) to nurse the eurozone back to health, driving the euro lower. The silver lining is that a super-low euro is exactly what is needed to halt the downward spiral in southern Europe and revive France's flagging industry. Only a much weaker euro can reduce break-up risk and significantly reduce the incentive for any country to exit. A weaker euro can save the euro in the end," said Bank of America.