The “euro crisis” is generally seen as a currency crisis, but it is also a sovereign debt and, even more, a banking crisis. The situation is complex. The complexity has bred confusion, and this has political consequences. Europe’s various member states have formed widely different views and their policies reflect their views rather than their true national interests. The clash of perceptions carries the seeds of serious political conflicts.

The solution that is about to be put in place will, in effect, be dictated by Germany, without whose sovereign credit no solution is possible. France tries to influence the outcome but in the end must yield to Germany because its triple A rating is dependent on being closely allied with Germany.

Germany blames the crisis on the countries that have lost competitiveness and run up their debts, and so puts all the burden of adjustment on debtor countries. This is a biased view, which ignores the fact that this is not only a sovereign debt crisis but also a currency and banking crisis – and Germany bears a major share of responsibility for those crises.