Government debt markets are about trust. Before the crisis, all eurozone governments enjoyed the benefit of their collective trustworthiness, co-operation and solidarity in the form of favourable financing conditions that contributed to the wellbeing of Europe.

Investor trust in the eurozone has been badly shaken in the past two years. The image of co-operation and solidarity has been shattered. As 2011 came to a close, questions about the survival of the euro that would have been considered taboo earlier began to surface. Following Greece, a number of member states faced difficulties refinancing their debts or lost access to markets altogether, despite the implementation of unprecedented fiscal programmes.

What caused this dramatic erosion of confidence? Was it the result of fiscal profligacy, such as that revealed in Greece, that marked the start of the slide? Was it the loss of competitiveness? Or current account imbalances? Without doubt all these were contributing factors. But the contagion that has spread to so many eurozone member states points to a broader problem: the incomplete design of the euro area – lax monitoring, inadequate enforcement of the rules and non-existence of a crisis management framework. It also points to the collective failure of eurozone decision makers to tackle this problem effectively. A failure that has been marked by a sequence of EU summits and aborted plans that have convinced some that a solution is beyond reach.