One of the most audacious experiments in internationalism and
political-economic unification, the euro, appears to be on the
verge of collapse.
What's destroying the common
currency
? There are hundreds of complex and interlocking factors, from the
problems of unifying totally disparate economies to irresponsible
lending practices to the shoddy bookkeeping and outright fraud
which kicked off the crisis in the Greek financial and revenue
collection system.
Economist Paul Krugman singles out the failure of the European
Central Bank and its director, Jean-Claude Trichet, to respond
aggressively to the growing crisis by lowering interest rates and
adopting the same kind of expansionist monetary policy pursued by
the Federal Reserve. "Trichet might as well have gone on TV and
announced, 'My colleagues and I are determined to make the
debt
problems of southern
Europe
insoluble,'" the columnist quipped in a blog post on
The NYTimes
.
The
Financial Times
reports that a group of European financial experts have signed a
letter which asserts the need to establish a truely international
system for backstopping the continent's financial system. At
present, such actions are taking place on the national level but
political intransigence has stymied efforts to implement a
universal eurozone system.
Meanwhile, in Italy, the
FT
writes that an Italian citizen, quickly followed by the Association
of Italian Banks, urged the people of Italy to do the patriotic
thing and purchase Italian
bonds
. Similar actions - more ideological than practical - are occuring
in other cash-strapped European nations like Spain and Belgium.
At the end of the day, there's really just one practical solution -
Germany, the continental creditor, will have to bite the bullet and
accede to some kind of international European
bond
instrument. That would create a way for the EU to borrow money and
pay it back jointly, which would practically have the effect of
making Germany responsible, in some greater or lesser degree, to
its indebted neighbors. However, Germany is already responsible in
a way, because its banks, along with France's, have done so much of
the lending to southern Europe.
If Germany doesn't agree to a eurobond, then the whole structure is
surely doomed.