EUROPE: Financial downturn has exposed flaws of the EU

While it is undoubtedly premature to prepare the obituary for European monetary union, the financial downturn of the past few years has mercilessly exposed its inherent flaws.

The inflexibility of a system that benefits some members and exacerbates the problems facing others has now caused a political crisis. As a member of the eurozone, Greece has experienced years of inappropriately low interest rates, which did little to help an overheating economy. Financial mismanagement has resulted in Greece’s total net liabilities reaching a level exceeding 750% of GDP. Deprived of full control over its own monetary policy, it now faces a period of extreme difficulty. Without the opportunity to devalue its own currency, the only remedy (as prescribed by the EU) is a pr...