In the eurozone, financial crises have forced out two governments, replacing elected representative with appointed technocrats charged with restoring order. Concern about the institutional integrity of the eurozone key to the architecture of modern Europe continues to mount.

All of this should not be seen as a concession, but as part of the obligations undertaken by eurozone governments to address excessive imbalances.

Scotching the Eurozone

Demokratisasi di Eurozone

Optimizing the Eurozone

Poland s Eurozone Tests

Rebalancing the Eurozone

Former Prime Minister Silvio Berlusconi wanted to solve the problem by withdrawing Italy from the eurozone and devaluing the new currency. He conducted exploratory conversations with other eurozone governments in the autumn of 2011, and had sought an agreement with Greek Prime Minister George Papandreou, who proposed a referendum that effectively would have meant choosing between strict austerity and exiting the eurozone.

Sustaining the Unsustainable Eurozone

Alexander Hamilton s Eurozone Tour

Down with the Eurozone

London vs. the Eurozone

In the eurozone, for the most part, national governments separately choose investment levels in infrastructure, education, research, and technology. Their labor market, social welfare, and competition policies vary.

It is easy to see why governments should de emphasize economic growth when it is proving so elusive. The eurozone is not expected to grow at all this year.

The Government the Eurozone Deserves

Eurozone Budgets Under the Spotlight

Growing Up in the Eurozone

Decision Time for the Eurozone

Golden Rules for the Eurozone

Judgment Day for the Eurozone

The Emerging Economies Eurozone Crisis

But, although the current European political process will not create strong fiscal discipline, financial markets are likely to force eurozone governments to reduce their sovereign debts and limit their fiscal deficits. During the single currency s first decade, private investors belief in the equality of all eurozone sovereign bonds kept interest rates low in the peripheral countries, even as their governments ran up large deficits and accumulated massive debt.

Signs of Life in the Eurozone

Will Vladimir Putin Bolster the Eurozone?

A Standby Program for the Eurozone

A Survival Strategy for the Eurozone

A Breach in the Eurozone Dike

For eurozone governments, that means that financial markets will now enforce what the political process cannot achieve. The EU s fiscal compact, whatever its final form, will be little more than a sideshow.

A New Approach to Eurozone Sovereign Debt

Back to the Brink for the Eurozone?

The False Promise of a Eurozone Budget

But debt relief of this sort vis à vis European governments or the European Central Bank has been kept off the table. Such measures would likely require parliamentary votes in countries across the eurozone, where many governments would face intense public opposition no matter how obvious the need.

German politicians would thus seem to be suffering from some serious delusions about the importance of gold and the effects of shifting its location. But they are right to worry about the ECB s policies Providing unconditional credit to eurozone governments is unlikely to make these governments more careful.

The euro crisis has given rise to a consensus that, in order to function effectively, the eurozone must pursue further integration. Specific proposals include a designated eurozone budget, increased fiscal policy coordination among members, and a eurozone finance minister.

Draghi designed it to relieve the ECB of the huge political responsibility of deciding when to save a country from default. For this reason, triggering the OMT mechanism requires the unanimous consent of eurozone governments.

Fiscal policy currently is a drag on economic growth in both the eurozone and the UK. Even in the US, state and local governments, and now the federal government, are cutting expenditure and reducing transfer payments.

Of course, who is ultimately proven correct is a function of eurozone governments willingness to make the difficult decisions that are required, and in a coordinated and timely fashion. But that is not the only determinant governments must also be able to turn things around once the willingness to do so materializes.

Throughout the crisis, it has been widely assumed at least so far that the eurozone core would remain solid, and would continue to write the checks for the periphery s distressed governments and banks. That assumption appeared plausible.

But allowing Greece to default and still remain in the eurozone is not an option it would signal that other eurozone countries could amass huge debts, funded by the ECB, without having any intention of repaying. Fiscal responsibility in the eurozone would be fatally undermined.

That is why I believe that these countries and the eurozone more generally would benefit from euro depreciation. Although a weaker euro would not increase their competitiveness relative to Germany and other eurozone countries, it would improve their competitiveness relative to all non eurozone countries.

Meanwhile, governments were running large deficits a legacy of the economic downturn which renewed growth was supposed to shrink. In the eurozone, countries like Greece faced sovereign debt crises as bank bailouts turned private debt into public debt.

The bitter dispute within the Eurogroup (comprising the eurozone countries finance ministers) not only strained relations among the monetary union s members, but also fueled tensions within national governments. Many European leaders are still smarting and licking their wounds.

France will have to say yes to a political union a common government with common parliamentary control for the eurozone. The eurozone s national governments already are acting in unison as a de facto government to address the crisis.

None of this means that eurozone members should be ready to pay whatever cost is needed to keep Greece inside the eurozone. This would obviously amount to a surrender.

The eurozone sovereign debt crisis appears to have been the worst managed financial crisis since Argentina s default in 2001. The European Union and eurozone leaders have seriously discredited themselves.