Paul De Grauwe, John Paulson Professor in European Political Economy at the London School of Economics and Political Science, was quoted in Thursday’s Wall Street Journal as saying

They in fact triggered the banking crisis. They’ve failed in their duty to ensure financial stability.

De Grauwe was asserting that the ECB’s decision to not increase the amount the central bank already had loaned to Greek banks for liquidity purposes was a mistake.

This criticism is nonsense. The ECB triggered no crisis; the Greek crisis already was in full swing, and had been for a number of years and two bailouts wasted by Greek profligacy. The ECB simply said, rightly, that enough was enough. Far from “ensuring financial stability,” the ECB protected their constituent members by ceasing to pour more of their money into a bottomless dry well. Financial stability was, and is, solely in Greek hands to achieve.

OPM is not methadone for the addicted. It’s a hand up for those trying to recover from bad luck and those willing to learn from their mistakes and do better.

Peter Müller and René Pfister have a piece up in Spiegel Online International concerning German Chancellor Angela Merkel’s handling of Greek Prime Minister Alexis Tsipras and of the Greek financial crisis. Müller and Pfister’s central thesis is that Merkel has mishandled the situation, and rather apocryphally, they suggest that any resulting failure of the euro will be the fault of Merkel’s policy regarding Greece.

Müller and Pfister are operating from the false premise that, beyond Merkel’s supposed mishandling of Greece and of Greece itself, the euro is fundamentally sound.

This is false. If the euro fails, it will not be because of Merkel’s policy regarding the Greek problem (I won’t call it a crisis, since it’s that only for Greece, and not at all for the rest of the eurozone) didn’t work, or even because of Greek-eurozone mutual intransigence. Any failure of the euro will flow from its poor construction.

On what basis can anyone think that a currency cobbled together from nations with as radically differing philosophies regarding the purpose of money or the role of government in society as is extant between, say, a Greece and a Germany or a Netherlands would have any durability at all?

Europe would be far better off well into the intermediate and nearby distant future were it set up as three or four smaller currency unions, each with much more homogeneous philosophies, and those currency unions then operating within a pan-Europe free trade zone.