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F E B R U A R Y 2 0 1 2 / F O R E I G N S E R V I C E J O U R N A L
19
etary policy. The European Central
Bank was not empowered to serve as
a lender of last resort to euro zone
governments, in contrast to the au-
thority the Federal Reserve had
been given in the United States.
The ECB was committed to fighting
inflation above all other goals and
was determined to ensure that the
euro would be a strong currency.
Nevertheless, all these doubts
about the viability of the euro were
subordinated to the foreign policy
priority attached to German unification and deeper inte-
gration of Europe. The consensus was that the fragilities
and fault lines in the euro zone could be dealt with at a
later stage.
The initial experience with the euro was positive, cre-
ating no sense of urgency to address the fragilities. Indeed,
the euro might have continued to enjoy success if the
global economy had evolved under
normal conditions. Unfortunately,
the seeds of various pre-existing
problems were sprouting, and the
global economy soon fell into its
deepest crisis since the Great De-
pression.
The stresses of the financial col-
lapse that began in 2007 and 2008
magnified the fault lines that had ex-
isted since the founding of the euro
zone. In the absence of a fiscal
union, the Europeans had adopted
the “Maastricht criteria” with the goal of ensuring that euro
zone members would maintain disciplined budget policies.
Unfortunately, there was only a weak commitment to polic-
ing compliance with this requirement.
The soft economy early in this century persuaded pol-
icymakers in France, Germany and the European Union
that deficits larger than those contemplated by Maastricht
F
OCUS
The creation of the euro
a decade ago was a major
step in the integration of
Europe and the binding
of Germany to a common
European future.