Legal requirements vs. economic principles: the European debt crisis

Since spring 2011, the supposedly unthinkable has become the focal point of economic debates in Europe – the insolvency of member states of the eurozone. Yields of more than 25% for investing in short-term government bonds of these countries, discussions about a debt reduction (haircut) or a conversion into Brady-type bonds (debt conversion into new bonds backed by the countries of the eurozone) were previously only typical for emerging or for developing countries. The risk premiums since the end of 2010, mainly for the peripheral countries of the euro area, have risen dramatically. In mid-2011, the risk premiums for credit default swaps for Greece were higher than for Venezuela. Although the international financial and economic crisis had a major impact on the public budgets of almost all important industrialized countries, which applies to both the US and its public budgets as well for Japan, the financial markets have focussed especially on the countries of the Eurozone and its relatively new currency. At times the very existence of the monetary union seemed endangered. Why has it come so far? Were the regulations not tough enough? Or are the laws economic principles too overpowering? This is discussed in this article using the example of fiscal and wage policies.