The new agreement by European Union members to stand together with the International Monetary Fund in support of Greece's effort to stave off fiscal calamity marks a turning point in a grand experiment that stood the relationship between politics and high finance on its head.
Unlike the U.S. after 1865 or Germany after 1989, where political unity created monetary unification, the launch of the euro in 1999 was just a monetary event and presumed that a political merger of EU states would come along eventually.
This has never been accomplished before, and it hasn't worked out as planned. The recession of the last year laid bare the structural divide that has existed and widened in the EU. It has provided a key lesson during the Greek debt crisis, which at more than $146 billion will be the most costly bailout ever.
Greece and its Club Med partners -- Portugal, Spain and Italy -- haven't come close to keeping pace with the German manufacturing industry in driving down relative unit-labor costs. The gap continues to widen. Year by year, the frugal Germans have won market share in the EU, which now absorbs more than 65 percent of their exports compared with about 45 percent in the mid-1990s, but Germany's key consumers are running out of purchasing power to keep its export champions humming. Long-term overproduction lies at one end of the chain, overconsumption lies at the other end, with growing and ultimately unsustainable debt linking the two. A single currency and monetary policy join them at the hip.
Read the full opinion editorial on Bloomberg.com.