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.