How to Prop Up the Euro

By STEVEN RATTNER
NYT

Here’s the critical takeaway from last week’s European rescue plan: Nothing in it addresses the endemic economic weaknesses that nearly propelled the euro zone into a meltdown.

However successful the package may prove in quelling turbulent markets (a questionable assumption, particularly after Greece’s decision to submit its latest rescue plan to a referendum), the members of the common currency still face the more daunting challenge of how to restructure their Rube Goldberg contraption so that such turmoil doesn’t recur.

The initial misstep by European leaders, of course, was lashing their nations to a common currency without integrating other critical policies, such as government borrowing and regulation.

That allowed differences in growth rates among the countries to persist — and even expand — during the boom-bust cycle of the past half-decade.

(More here.)