It might have five years ago. Or five years from now. Not right now.



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After a weekend of panic over the fate of the euro, European stocks soared Monday morning. The reason? Leaders are reportedly near a historic bargain to corral the EU's most indebted countries and announce a deal that would bring Europe closer to a true fiscal union.

There's just one problem. Fiscal unity cannot save Europe. It might have five years ago. Or five years from now. Not right now.

Fiscal union means France and Germany exercise control over the budget and taxes of countries like Greece. But it's not as though Greece is one really smart tax-and-spending plan away from solvency. It's a broken economy. "Greece is totally gone," Desmond Lachman of the American Enterprise Institute put it to me. "It's just a matter of time until they have a disorderly default."

The European debt crisis in a nutshell is that poorer peripheral countries have large imbalances that ought to be solved by devaluing their own currency. But these countries don't have their own currencies. They have the euro.

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To understand why the euro has turned into such a disaster, let's revisit why it exists in the first place. The idea was that a European currency would make all of Europe feel richer. The poorer PIIGS (an acronym that stands for the peripheral countries Portugal, Ireland, Italy, Greece, and Spain) wanted to share a currency with Germany so that they could borrow money at affordable rates. Germany wanted a euro, too, because if its neighbors felt richer, they would buy more German products.