There is an interesting op-ed in the Financial Times by Niall Ferguson and Nouriel Roubini. They point out that Europe has dithered over recapitalizing their banks, often relying on sovereign debt to do so. Of course, the sovereign debt is part of the problem now. They also argue that Germany is key but Germany is focusing too much on the hyperinflation after WW I and not enough on 1933. They offer some solutions that could be worked, and note that the monetary union always implied further fiscal and political integration, a point I have often made.
They conclude with:
Ultimately, as Angela Merkel, the German chancellor, herself acknowledged last week, monetary union always implied further integration into a fiscal and political union. But before Europe gets anywhere near taking this historical step, it must first of all show it has learnt the lessons of the past. The EU was created to avoid repeating the disasters of the 1930s. It is time Europe’s leaders – and especially Germany’s – understood how perilously close they are to doing just that.