Origin of the European sovereign debt crisis

Jesus Huerta de Soto on Philipp Bagus' thesis
"The Tragedy of the Euro"
".. The current sovereign-debt crisis is the direct result of credit expansion by the European banking system. In the early 2000s, credit was expanded especially in the periphery of the European Monetary Union such as in Ireland, Greece, Portugal, and Spain. Interest rates were reduced substantially by credit expansion coupled with a fall both in inflationary expectations and risk premiums. The sharp fall in inflationary expectations was caused by the prestige of the newly created European Central Bank as a copy of the Bundesbank. Risk premiums were reduced artificially due to the expected support by stronger nations. The result was an artificial boom. Asset-price bubbles such as a housing bubble in Spain developed. The newly created money was primarily injected in the countries of the periphery where it financed overconsumption and malinvestments, mainly in overextended automobile and construction sectors. At the same time, the credit expansion also helped to finance and expand unsustainable welfare states..."
Read more
Comment: I totally agree with Bagus and de Soto when it comes to their monetary analysis. Yet what they neglect is the fact that the euro is more a political than an economic project. Even more: the euro is an instrument to (re)gain geopolitical power for the Europeans. In other words: the euro is an imperial tool. In this respect bad economics is a given. The euro does have moral hazard effects, yes, as the authors observe. Yet the main point is that the euro project itself is hazardous game. Bad economics would no longer matter if the gamble will succeed. Current losses would be recouped a thousandfold just if oil were traded in euros or partly in euros. As of now it is already a fact that no far-reaching decision concerning the international monetary order can be taken against the will of the leaders of the eurozone. On a net basis, and even with the costs of the current sovereign debt crisis included, the euro has been beneficial for the whole region and beyond.