Can the euro be saved?

A huge symbol of the euro is placed in front of the European Central Bank (ECB) late on June 1, 2008 in Frankfurt.</p>

A huge symbol of the euro is placed in front of the European Central Bank (ECB) late on June 1, 2008 in Frankfurt.

There's been no shortage of drama surrounding Europe's ongoing debt mess.

U.S. Treasury Secretary Timothy Geithner even got in on the action Friday, joining European finance ministers for crisis talks in Wroclaw, Poland. 

Geithner's appearance, which comes just a week after G7 finance ministers met in France, is a strong indication of the seriousness of the situation.

At the meeting, Geithner said Europe must figure the problem out itself — or leave its its fate to others.

Here's how Bloomberg put it:

“One of the starkest ways to emphasize the importance of Europe getting on top of this is that you don’t want the fate of Europe to rest in the hands of those who provide financing to the International Monetary Fund, or who provide financing outside of the I.M.F.,” Geithner said.

Meanwhile, our friends at the Economist also entered the European advice business. In today's must-read story on the crisis, the London-based newspaper urged "action on a huge scale."

Here's the money quote:

The only way to stop the downward spiral now is an act of supreme collective will by euro-zone governments to erect a barrage of financial measures to stave off the crisis and put the governance of the euro on a sounder footing. The costs will be large. Few people, least of all this newspaper, want either vast intervention in financial markets or a big shift of national sovereignty to Europe. Nor do many welcome a bigger divide between the 17 countries of the euro zone and the EU’s remaining ten. It is just that the alternatives are far worse. That is the blunt truth that Germany’s Angela Merkel, in particular, urgently needs to explain to her people.

In particular, the Economist said four things need to happen:

  • Europe's leaders must make clear which of Europe’s governments are deemed illiquid and which are insolvent, giving unlimited backing to the solvent governments but restructuring the debt of those that can never repay it. 
  • They must shore up Europe’s banks so they can withstand a sovereign default. 
  • They must shift the euro zone’s macroeconomic policy from an obsession with budget-cutting towards an agenda for growth. 
  • They must start the process of designing a new system to stop such a mess ever being created again.

Of course, all of this is easier said than done. That's especially true for that last part, which will be slowed by internal politics, new treaties and the vagaries of voters.

But it's a start.