So began a response Thursday from Jean-Claude Trichet, the president of the European Central Bank, as he explained the central bank’s decision to raise interest rates in Europe.
If only there were a “euro area as a whole.”
Instead, the big challenge facing the euro area is precisely that it is not a whole. Europe chose monetary union without political or economic union. There were wide spreads in inflation, and lower interest rates in the decade after the euro was created allowed some peripheral countries to ignore needs for economic reform.
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