Knot a Union

Since its founding in 1999 it's been clear, theoretically, that the Eurozone cannot function smoothly — or democratically — without fiscal integration commensurate with a single currency. That the Eurozone has already lasted as long as it has without a catastrophically debilitating crisis is something of a miracle. Now, regardless of what precipitated the debt debacle (and I suspect the proximate cause to be exotic, opaque, unregulated financial instruments combined with old fashioned bond market manipulation) there are only two ways forward: on the one hand serial defaults and unending bailouts, on the other a restructuring of the Eurozone into a two-tier system with tighter fiscal integration of its larger, core economies. I've suggested a couple of times that I thought the latter outcome might be more likely, appearances from the Greek fail to the contrary, and now Reuters (via BBC) reports "France and Germany have had intense consultations... over the last months, at all levels..." Stay tuned, because as the bond vigilantes turn their attention to Italy developments may happen pretty fast.