Whether Christine Lagarde and the IMF can save the Euro is an open question. Lagarde has intimate knowledge of the European financial system but so did her disgraced predecessor. The lessons of the Euro crisis lie elsewhere. The problems of Greece, Spain and Portugal stem in part from lack of fiscal discipline and in part from the weakness of their economic base at a time of upheaval in the world markets. But they were not the only EU countries to blame for their lack of fiscal discipline. Big EU countries, France included, have time and again failed to respect their commitments to maintain their inflation rates below the commonly agreed-upon threshold. By so doing, they contributed to weakening the ability of the European Central Bank to implement its monetary policy. They also set the tone for smaller EU countries, which could always blame them for trying to force onto others what they were not willing to do themselves. In an interconnected world, be it at the level of the EU or more globally, major powers are trendsetters, whether for good or ill. This lesson should not be lost on the United States as it grapples, in its own turn, with putting its financial house in order.
Professor of Political Science, Research Director, Université de Montréal