This editorial in the Wall Street Journal provides an excellent introductory comment to the European debt crisis now underway:
The German Bundestag voted last week to expand the European fund established last year to bail out Greece—or, rather, Greece’s creditors. In doing so, it also moved the euro zone one step further away from the bloc’s founding principle that its members would share a currency, but be responsible for their own fiscal policies within that currency zone.
In the current global environment of floating exchange rates, this idea seemed radical, and many people thought the experiment was doomed to failure. Yet historically speaking, the real novelty is our system of fiat currencies and floating exchange rates.
(H/T Detlev Schlichter)