BERKELEY – There is no shortage of talk nowadays about Europe’s deficits and the need to correct them. Critics point to governments’ gaping budget deficits. They cite the southern European countries’ chronic external deficits. They highlight the eurozone’s institutional deficits – a single currency and a central bank but none of the other elements of a well-functioning monetary union.
Of course, in all of these areas, the critics have a point. But none of these is the deficit that really matters. The deficit that prevents Europe from drawing a line under its crisis is a deficit of trust.