What doesn’t kill the euro region may make it stronger.
As the sharpest contraction since World War II batters the 16-nation economy, Europe’s leaders are belatedly -- and reluctantly -- starting to fix design flaws, including a patchwork of financial regulations and lack of fiscal coordination, that hamper the decade-old monetary union. “A crisis is a terrible thing to waste,” says Barry Eichengreen, a professor at the University of California at Berkeley and author of a 2006 book on Europe’s economic history. “Crisis can be a catalyst for reform, and in Europe’s case we see the possibility of that happening.”
Efforts to fortify the foundations of the single currency are gaining momentum. A panel of European Union advisers recommended on Feb. 25 the creation of new agencies with power to tie together national regulators of banks, insurers and securities firms. Multilateral institutions including the World Bank on Feb. 27 offered billions of euros of loans in an effort to keep collapsing economies in the east from dragging Europe into a worse recession.
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