At the euro's creation, many worried about its long-run viability. When everything went well, these worries were forgotten. But the question of how adjustments would be made if part of the eurozone were hit by a strong adverse shock lingered.

Fixing the exchange rate and delegating monetary policy to the European Central Bank eliminated two primary means by which national governments stimulate their economies to avoid recession.

What could replace them?

The Nobel Laureate Robert Mundell laid out the conditions under which a single currency could work. Europe didn't meet those conditions at the time; it still doesn't. The removal of legal barriers to the movement of workers created a single labor market, but linguistic and cultural differences make American-style labor mobility unachievable.

Moreover, Europe has no way of helping those countries facing severe problems. Consider Spain, which has an unemployment rate of 20 percent. It had a fiscal surplus before the crisis; after the crisis, its deficit increased to more than 11 percent of GDP. But, under European Union rules, Spain must now cut its spending, which will likely exacerbate unemployment.

Some hoped that the Greek tragedy would convince policy makers that the euro cannot succeed without greater cooperation (including fiscal assistance).

But Germany, partly following popular opinion, has opposed giving Greece the help that it needs. To many, both in and outside of Greece, this stance was peculiar: billions had been spent saving big banks, but evidently saving a country of 11 million people was taboo. It was not even clear that the help Greece needed should be labeled a bailout: while the funds given to financial institutions like AIG were unlikely to be recouped, a loan to Greece at a reasonable interest rate would likely be repaid.

A series of half-offers and vague promises, intended to calm the market, failed. Just as the United States had cobbled together assistance for Mexico 15 years ago by combining help from the International Monetary Fund and the G7, so, too, the EU put together an assistance program with the IMF.

The question was, what conditions would be imposed on Greece? How big would be the adverse impact?