Euro Debt Crisis Is Political Test for Bloc

The New York Times reports:

What began with worries about the solvency of Greece in the face of high deficits, fake budget figures and low growth has quickly become the most severe test of the 16-nation euro zone in its 11-year history.

Anxiety about the health of the euro, which has spread from Greece to Portugal, Spain and Italy, is not simply a crisis of debts, rating agencies and volatile markets. The issue has at its heart elements of a political crisis, because it goes to the central dilemma of the European Union: the continuing grip of individual states over economic and fiscal policy, which makes it difficult for the union as a whole to exercise the political leadership needed to deal effectively with a crisis.

A policy of muddling through may be comfortable in political terms, but experts warn it can have dire economic consequences. Jean-Paul Fitoussi, professor of economics at the Institute of Political Studies in Paris, said that European leaders had “handled this crisis very badly,” feeding market speculation and greed.

Greece’s ratio of public debt to gross domestic product is no higher than Germany’s, and Greece has not defaulted, he said, but European leaders have done too little to calm the markets and rating agencies.

The beginning of the end of the Euro.