May 14, 2010: According to German chancellor Angela Merkel, the Greek debt crisis has led Europe to a fork in the road that will require the European Union to decide whether or not it will succeed. The key to success is the survival of the euro as the European Union's current and future common currency. According to Mrs. Merkel, if the euro fails because of the debt crisis, then the European Union will be finished.

Her emphasis on the importance of the euro's survival and its future viability might seem odd in view of various suggestions heard recently concerning possible solutions to the debt crisis. One suggestion is to simply let the Greek government default on its debt. Economic experts – especially in North America – have called the bailout plan for Greece a big mistake that will be place an unbearable strain on European Union eurozone members. (Just last week Germany pledged 22 billion euros as its share of the initial bailout of 110 billion for eurozone member Greece.) Eurozone supporters like Mrs. Merkel counter with the argument that allowing Greece to default on its debt might lessen the immediate financial burden but would have a negative long-term effect for confidence in the euro as a reserve and commerce currency.

Another suggestion is that the other eurozone members simply kick Greece out of the eurozone, forcing it to return to its former currency (or a different new currency). While this suggestion might appear to make sense on the surface, the European Union has established a goal of making the euro the common currency within the European Union. In fact, the new EU members admitted since 2004 – and all new members admitted in the future – are required to agree to joining the eurozone as soon as their economies meet the required limits on annual deficit spending and total national debt. If the euro fails – either by kicking Greece and possibly other EU members out of the eurozone or by the failure of the euro itself – European Union treaties will be violated, and the damage to the EU will be irreparable. This is why Mrs. Merkel has insisted that defending the euro is a key element in the overall success of the European Union.

As the old saying goes, the Greek debt crisis appears to be providing the EU an opportunity to make lemonade out of lemons. In my article titled Europe's New Money, published on December 10, 2001 just three weeks prior to the introduction of the new currency, I wrote the following concerning the future success of the euro:

"Critics of the euro have warned for several years that the euro may experience difficulty in becoming a stable hard currency unless economic policy is coordinated among euro countries in the same way that monetary policy is determined by the ECB.

If those critics are proven to be correct, then the remedy will hardly be a return to individual national currencies . . . If the critics are right, then the more likely scenario will be the establishment of centrally coordinated economic policy for the euro zone. This, in turn, would represent a further weakening of national sovereignty and require new political institutions to determine such policies."

As a result of the Greek debt crisis, ideas are being voiced in Europe that would have been unthinkable just a few years ago. For example, some eurozone defenders are calling for the European Commission to approve all national budgets in the eurozone annually prior to their implementation. While that will not happen anytime soon, the thought processes have been set in motion that will led to greater central coordination of economic policy within the eurozone. That will be the lemonade arising from the bitter lemons that large eurozone members like Germany are having to swallow at this time by pledging financial support for Greece.

If the European Union is to survive and move toward greater political union, it has no other choice.