We must not repeat the mistake of assuming that thanks to some “magic” Europe is immune to any crisis. The second simplifying assumption that was made by the founding fathers is that markets work perfectly and can assess the various risks at any time, including those arising from an excessive accumulation of public debt.
The experience of recent years has shown that this is not the case. For a long period – from approximately the start of the euro until about 2007 – markets assessed the credit risk of the various sovereign issuers in the euro area to be largely similar.