It shows us how unworkable the euro is in its current form. Not that the crisis hasn’t already shown us that many times over. It would have required something approaching inhuman clairvoyance — or at least Michael Burry-level clairvoyance — for Spain to have run “big enough” surpluses in the mid-aughts. If Spain’s government had been that prescient, they may as well have shorted themselves. Now, I’m being a bit facetious, but let’s remember: this wouldn’t have “saved” Spain. Even counter-cyclical fiscal policy during the boom only would have ameliorated the subsequent slump. Spain would still have a competitiveness problem today. Unemployment would almost certainly still be disastrously high.
I’m not breaking news when I tell you that Europe doesn’t have the institutions it needs to make the euro work. If it did, there wouldn’t be a crisis. Unfortunately, Europe’s leaders aren’t making much progress on these larger issues. People often say that the costs of a euro breakup would be astronomically high. They are certainly right. But the costs of living with the euro? They’re already astronomical.