LONDON — The Greek debt problem has been poorly handled by Europe's decision-makers. European Union heads of government, and the European Central Bank, initially rejected the idea of involving the International Monetary Fund, but without a fall-back plan. It is hard to avoid the conclusion that part of the motivation for this was French President Nicolas Sarkozy's reluctance to see Dominique Strauss-Kahn, the IMF's managing director, ride in from Washington to the rescue of the euro zone. Strauss-Kahn is, of course, likely to be Sarkozy's Socialist rival in the next French presidential election.
Is Greece the "canary in the coal mine" — the warning that tells us that Europe's monetary union is on the verge of dissolution, with the other three of the famous PIGS (Portugal, Italy and Spain) lining up like dominoes to fall? George Soros fears this might be the case, and gives the euro zone only a 50 percent chance of survival in its present form.
Certainly, the episode highlighted flaws in the way the euro's governance — flaws that are no surprise to some of those involved in creating the common currency. Former German Chancellor Helmut Kohl, one of the euro's principal parents, said in 1991 that "the idea of sustaining an economic and monetary union over time without political union is a fallacy."
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