One of the best lines I heard at this year's CEA meetings was delivered by Chris Ragan , at a session on the Euro organized by Paul Jenkins.

Chris was speaking to a picture of Eurozone bond yields, much like this one that I've lifted from An Economic Sense

Looking at the convergence between the yields on higher-risk bonds like Greece's, and lower-risk bonds like Germany's, after the introduction of the Euro, Chris Ragan observed, "You look at this picture and ask yourself: What were they thinking? Actually, you can tell what they were thinking. The question is why they were thinking it."

The convergence of bond yields after the Euro was introduced reveals that the pre-Euro yield differences were almost entirely based on inflation and exchange rate risk. No one ever seriously considered the possibility that an EU country might not be able to repay its debt. That's what they were thinking. But as Chris says, the question is: Why?