The misconstruction of the European Monetary Union is responsible for this debacle. It will not stop with Greece, Cyprus, and now Portugal, because the economic forces of "moral hazard" and "tragedy-of-the-commons" that caused such excess debt are still working their damage. This damage will be revealed country by country. The euro experiment has failed spectacularly in just twelve short years. This should be a lesson not to trust governments to replace natural markets with artificial ones. For political reasons the European countries tried to implement Robert Mundell's great experiment in manufacturing a common fiat currency to be jointly managed by an international committee. The euro elite wanted a federal Europe, so they foisted the common currency on a reluctant continent in order to use it as a tool to achieve power over national governments. But there is no public consensus for a federal Europe. Each country's national government used the euro project simply to expand its budget by borrowing at lower costs. At this point the outcome is uncertain, but there are no easy exit strategies. My guess is that the ECB will print more money (that's what central bankers always do), which will just exacerbate the problem. The only sane solution is to admit that the euro experiment was a failure, reinstate national currencies, and tie them to each country's gold reserves. Some countries may prefer to join a deutsche mark zone. It is possible that over time Europe would be one big deutsche mark zone, run by the Bundesbank in Frankfurt. A golden deutsche mark would create the conditions for other currencies, such as the dollar, to be tied to gold out of rational self-interest. Otherwise, the deutsche mark will supplant the dollar as the preferred currency for international trade.
Now it's Portugal's turn, by Ambrose Evans-Pritchard in the Telegraph
My comments on Evans-Pritchard's column: