After ten seemingly successful years, the project of European economic and monetary union has encountered its first existential crisis. One country has flouted the block’s stability rules, and teeters on the brink of bankruptcy, several others carry so much contingent debt – in the form of bank guarantees – that their future position in the eurozone must be regarded as doubtful. For the first time in the history of the project, a serious discussion has erupted about the future of the euro and the political implications of monetary union. This essay will attempt to disentangle the debate. The first part deals with the historical roots of the present crisis; the second provides a detailed analysis of the crisis itself, and the third points to ways out of the crisis; a final section concludes.

1. The Prodi Moment - a brief history of the European debt crisis

The euro’s sovereign debt crisis did not arrive out of th...