When the history of the rise and fall of postwar Western Europe is someday written, it will come in three volumes. Title them "Hard Facts," "Convenient Fictions" and—the volume still being written—"Fraud."

The hardest fact on which postwar Europe was founded was military necessity, crisply summed up by Lord Ismay's famous line that NATO's mission was "to keep the Russians out, the Americans in, and the Germans down." The next hard fact was hard money, the gift of Ludwig Erhard, author of the economic reforms that created...