The Audacity of the Euro: A Look Back at a Tense 2010

by Stephen Fidler

Wall Street Journal
December 24, 2010

With every passing month in 2010, the audacity of the euro's creation has become more apparent. How could European governments believe they would be able to hold together a common currency with a single monetary policy—and each of them pursue widely different economic policies in every other respect?

This question is at the root of the inevitable deep tensions within the euro zone that weren't so evident in the currency's first easy decade. Here are ways in which some of those tensions have manifested themselves in 2010.

Discipline versus solidarity

This is the tension that has gripped the euro zone throughout the year. If Greece is left to fall victim to the depredations of the financial markets, then it could set off events that could bring down the euro. But if you step in and provide Greece with a financial cushion to stave off the markets, how do you get it to correct its profligate ways?

Euro-zone countries have tried to resolve that dilemma by imposing tough conditions from the International Monetary Fund on countries being rescued. More broadly, they have sought to toughen up-to-now ineffective sanctions on countries that bust the budget and deficit rules and to broaden the scope of cooperation to include other economic variables.

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