David Cameron's withdrawal from an EU-wide treaty to deal with the debt crisis was the right thing to do as the treaty on the table won't fix the crisis and threatened the position of the City as the world's premier financial market. However, it not leaves Britain as potentially the only member of the EU not to sign up to the deal. Consequently, Britain may be marginalised and full withdrawal (or ejection) from the EU may be just around the corner unless the Euro collapses first, which is becoming more likely every day. The treaty needed two things to save the euro - (a) the ability to have fiscal transfers to economies hit by demand shocks (e.g., the PIIGS) and (b) a change in the ECB's mandate, which would enable it to monetise the debt of EU sovereign states.
As an undergraduate, I was taught about the failure of Herstatt Bank in 1974 and Herstatt risk. This bank was only the 35th largest bank in Germany at the time so why would anyone be interested in studying its failure? Herstatt failed because of its involvement in risky foreign exchange business. When it closed its doors on 26 June 1974, counterparty banks (mainly in New York) had not received dollars due to them because of time-zone differences - this is known as settlement risk. The cross-jurisdictional implications of its failure resulted in the Bank for International Settlements setting up the Basel Committee on Banking Supervision and Herstatt's failure was a key reason for the establishment of real-time gross settlements systems, which ensures that payments between two banks are executed in real time. The Bank of England's Ben Norman has an interesting post on Herstatt over at the Bank's new blog ( Bank Underground ). As well as giving an excellent overview of