The eurozone financial crisis has lasted so long and been managed so poorly because policy makers have disregarded some fundamental aspects of the way in which financial markets work. In fact, the euro was created under the assumption – or rather the illusion – that financial crises would never happen because markets would discipline member states’ budgets. Furthermore, when the first problems emerged in Greece, the risk of contagion to other countries was ignored and the crisis was addressed in a piecemeal approach. Only when contagion became apparent and threatened the integrity of the eurozone was an agreement reached to create a safety net.
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