Assuming that Germany will not agree to pay the debts of other European countries, either by allowing inflation of the euro or by direct transfer payments, the Europeans face a stark choice: ignore economic reality or ignore political reality. If they persist in a currency union without some kind of budgetary union, implosion will come sooner or later. If, on the other hand, they go for budgetary union, a political explosion will happen sooner or later.

The euro’s tragic dilemma must be what Paul Krugman, writing in the International Herald Tribune, is referring to when he calls the currency “that grand, flawed experiment in monetary union without political union.” As for “the broader European project,” he describes it as “the attempt to bring peace, prosperity and democracy to a continent with a terrible history.” One can only marvel at such hubris. Europe is not so much the God that failed as the megalomaniac fantasy that failed.