The Eurozone’s Strength in Disunity

FLORENCE – For months, an increasingly frenetic, even apocalyptic, debate about the fate of the euro has been the major driver of global instability. Can Europe’s common currency survive?  No less a figure than former United States Federal Reserve Chairman Alan Greenspan has now declared that it cannot.

But the euro also seems surprisingly resilient in the face of this woe. Unlike in the early summer of 2010, it has been largely stable relative to the dollar on foreign-exchange markets. That stability is puzzling.

Skeptics have plenty of ammunition for their critique of the euro. European governments’ high-level crisis diplomacy and new and ever more complex mechanisms sometimes briefly calm the markets, but the tide of doubt quickly sweeps back in. For a day, or sometimes only for a few hours, traders succumb to the illusion of stability, fueling a euphoric but ephemeral financial-market rally. Then they awaken to the reality that not much has really changed, and that in a few weeks or months the problems will reappear in a seemingly even more intractable form.

All manner of new legal and constitutional difficulties constantly arise. Is an amendment to the EU treaty required? Isn’t that politically unthinkable? One is ineluctably led to the conclusion that governance of the eurozone is irredeemably flawed.