(continued from below)
So now the Eurozone is faced with a situation where all members share one monetary policy, set by the ECB in Frankfurt, but NOT one economic performance. German unemployment peaked at about 8% in June of 2009, and fell below 7% by the summer of 2011. Over that same summer, the ECB raised its target interest rate three times, tripiling it from 0.5% to 1.5%. In other words, the EUROPEAN central bank has acted as if it is the GERMAN central bank and nothing more. With the rest of the continent still mired in unemployment, the issuing authority of the euro declared the slump over and raised rates.
At the time of this writing, the Italian unemployment rate was 8.3%. The Irish unemployment rate was 14.2%. The Portuguese unemployment rate was 12.5%. The Spanish unemployment rate was a whopping 22.6%. And the folks at the ECB could not care less, because the German unemployment rate is at comfortable 5.8%. Mission accomplished, they say.
And that leads us to the current looming sovereign debt crisis.