The crisis in Euroland must be one of the slowest motion films that we have ever witnessed since the 1930s. European leaders are transfixed by the challenge they sense: on the one hand, their electorates continue to live in their own national worlds; on the other hand, the only solution which follows on the decisions to create the Euro over 20 years ago is to move to fiscal federalism, implying a new Treaty. The problem is that the crisis hit just as the long discussions on the Lisbon consti-Treaty had been brought to a weary conclusion. And the paradox is that, while Euroland leaders denounce the workings of global financial markets, their inaction leaves the markets to set the agenda. The agenda is being set by the markets because investors don’t see signs of a great leap into fiscal federalism, and they don’t consider the status quo sustainable. Ingo Walter and I wrote this piece in May 2010.
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