How Will the Euro Zone Crisis End?
ENFORCE DEFICIT LIMITS—WITH SANCTIONS
Pro: A clearly necessary step to keep member nations from spending their way into trouble.
Con: Budget deficits are inevitable in recessions. Deciding when they are and aren't acceptable will remain difficult.
BREAK UP THE EURO ZONE
Pro: Allows weak nations that leave (perhaps temporarily) to regain cost competitiveness through a currency devaluation.
Con: Proliferation of currencies would complicate trade and investment. Chaos, lawsuits, and national defaults could be the result.
CREATE A "UNITED STATES OF EUROPE"
Pro: A unified taxing and spending authority would be the strongest guarantee of euro stability.
Con: It would violate the euro zone treaty, and its infringement on sovereignty would surely be rejected by all member nations. An EU nonstarter.