Merkel's Leadership 'Like Captain of Titanic': Analyst

The only real solution to the crisis currently dragging down the euro zone is the scrapping of the single currency, according to John Wadle, head of regional banks research at Mirae Asset.

German Chancellor Angela Merkel
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German Chancellor Angela Merkel

In a research note, Wadle said it was difficult to see a situation where the euro was not split "rather than an opt-out for the weak countries in Europe, which will just create further pressure across the system." "Germany, France and northern countries should create a new euro and let the old euro be the currency for the PIIGS and let this get devalued," he said.

This, Wadle argued, will be less painful – although still costly - for everyone and practical because the financial system can be better ring-fenced and avoid system-wide contagion.

He added it was either the above scenario or the European Central Bank agreeing to buy unlimited amounts of Spanish and Italian debt in the next few weeks, which he said Germany would not agree to.

Wadle described German Chancellor Angela Merkel's handling of the crisis as resembling the captain of the Titanic after the iceberg has hit.

"Merkel said yesterday, 'It's time for a breakthrough to a new Europe.' This is like the captain of the Titanic saying after hitting the iceberg, 'okay everyone let's go for a swim'," Wadle said.

Merkel was speaking at the two-day annual Christian Democratic Union congress in Germany, which has become dominated by the debt crisis engulfing the region.

According to Wadle it is a mistake to put pressure on the weaker European nations.

Merkel has called for sanctions against countries which fail to adhere to budget and debt standards and the ability for countries to opt out of the euro if they wish.

"This is a tragic mistake as it creates further pressure for PIIGS' depositors and debt holders to head for the exit," he wrote.

The core issue is that there is too much debt in many of the countries facing problems, with no attempt to address the competitiveness issue, according to Wadle.

"Unfortunately, the preferred option of muddle, fiscal austerity in the periphery and empty promises of more integration will not work in reality," he wrote.

The sentiment was reiterated by Richard Kelly, head of European rates and FX research at TD Securities, who said the existing plans were not working.

"We need to move onto something new. We have started to lose the EFSF in its current form as something to backstop Italy, and as you get that contagion into France and Spain as well.

"You really need something of a game changer and I don't know the political will is there to change as fast as it needs to now," Kelly told CNBC.