The Euro - What Should Have Been 

In my opinion the Europeans have snatched defeat from the jaws of victory……

First, Europeans didn't trust markets. The acceptability of a member state default should have been the primary Maastricht weapon to ensure fiscal probity. (I have written over and over how US states defaulted in the 1840s without permanent damage to the American union. But instead one bailout after another was set up for Greece and the European Central Bank began printing money.)

Second, the euro is getting blamed for the sins of socialism. (The fatal attraction of populism has been quite evident in the European political process which has promised more and more ultimately unaffordable benefits. The governments in Europe for quite some time have been gradually devouring their economies. The bulk of the countries in Europe are headed for bankruptcy anyway and the euro is taking the blame.)

Third, somehow the Europeans managed to saddle themselves with a bank clearing mechanism that effectively has allowed the weaker states to pile up with impunity more debt obligations to the strong states. (This has provided the peripheral weaker countries with another ATM machine not subject to market discipline.)

Fourth, the banking systems of Europe were not allowed to become integrated. (Each country has its own set of national banks which have their own sets of regulators and which tend to be undiversified in terms of deposits and lending. The banks are captives of the national governments for whom financial repression, to use an old economic term repopularized by Reinhart and Rogoff, is a routine practice.)

                                          …………………. Peter T Treadway.