For European Union and the Euro, a Moment of Truth

At New York Times, "Even as Governments Act, Time Runs Short for Euro."

BERLIN — The window of opportunity to save the euro is rapidly closing, as the sovereign debt crisis erodes the solvency of Europe’s banks and drives up borrowing rates for even once rock-solid countries like France.

A growing consensus about the urgency of Europe’s situation has brought some drastic and tangible steps toward dealing with it: first by Greece, then by Italy, where lawmakers on Saturday signed off on austerity measures and cleared the way for Prime Minister Silvio Berlusconi to step down.

Both countries are moving toward more technocratic governments that are committed to delivering the difficult reforms demanded by the European Union, the European Central Bank and the International Monetary Fund. But there are a host of problems that could quickly overwhelm that progress.

Looming over all the discussions of reform and financing mechanisms is the slowdown in the Continent’s already anemic growth rate, to 0.5 percent in 2012, and even the threat of a double-dip recession, the European Commission said in a forecast for the euro zone last week.

That calls into doubt the adequacy of the euro zone’s latest attempt to placate the markets, the lagging effort to bolster the $605 billion European Financial Stability Facility to $1.4 trillion or to find other funding. The task will become that much harder in a recessionary environment, especially as France’s credibility with investors begins to decline.

More at that top link. Plus, at Telegraph UK, "Germany must decide if it wants the eurozone to survive or perish":

European debt and equity markets ended a tumultuous week with a rally on Friday. So shares in the US and across the rest of the world rose too. But the threat of a "euroquake" – a systemic collapse which would make Lehman Brothers look tame – is by no means over. Far from it.

Europe's leaders don't know how to solve this crisis because they don't know what they want.

Should attempts be made to hold the eurozone together, with Greece staying in? Or should the threat to expel Athens be followed through, at the risk of causing further defections, with monetary union being reduced to a Franco-German rump?

This is an enormous question, which only Germany can answer. Until an answer is forthcoming, chaos will continue to ensue.