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After almost two years in which the focal point of the euro-zone debt crisis has shifted from one European capital to another, it has finally arrived where it belongs:  in the bloc's headquarters in Brussels.

Simon Nixon, Wall Street Journal,  22 November 2011

The crisis has only ever been partly about the sustainability of the sovereign debts of Greece, Ireland, Portugal, Italy and Spain.

More crucially, it has always been a political crisis, an institutional crisis, a crisis of governance. It has been about the failure of the euro zone to develop the necessary mechanisms to ensure financial discipline among its member states and to come to the aid of countries when they ran into financial trouble, thereby ensuring that a debt problem in one of its smallest members should become an existential threat to the currency itself.

There can be no solution to the euro-zone crisis that doesn't first address this governance crisis.

Two myths have until now sustained the hopes of those betting the euro zone could exit the crisis.

The first was the belief that rising government bond yields simply reflected the loss of credibility by some governments — for which the solution was an even-greater commitment to austerity and structural reform and, if necessary, its replacement by technocrats.

The second myth was the view that if the survival of the euro zone were threatened, the European Central Bank would ride to the rescue of cash-strapped governments, deploying its all-powerful "bazooka" to prevent a collapse into chaos.

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