Wall Street Journal
November 22, 2011
After nearly two years in which the focal point of the euro-zone debt crisis has shifted from one European capital to another, it has finally arrived where it belongs: in the bloc's headquarters in Brussels.
The crisis has only ever been partly about the sustainability of the sovereign debts of Greece, Ireland, Portugal, Italy and Spain. More crucially, it has always been a political crisis, an institutional crisis, a crisis of governance. It has been about a failure to develop mechanisms to ensure financial discipline among euro-zone members and to come to the aid of countries in financial trouble. There can be no solution to the crisis that doesn't first address this governance crisis.
Two myths have sustained hopes. First, that rising government-bond yields simply reflected a loss of credibility by some governments—for which the solution was an even-greater commitment to austerity and structural reform. Second, that if the euro zone's survival were threatened, the European Central Bank would deploy its all-powerful "bazooka" to buy bonds and prevent a collapse into chaos.
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