The euro's tribulations.

The Wall Street Journal editorial page says don't blame the euro for the failures of Keynesian economics.

While not the cause of this crisis, the euro has been tarnished by it. Greece's Madoff like bookkeeping broke the mutual trust that is essential to any monetary compact, and this will take time to restore.

Shortcomings in the rules governing the euro zone were evident long before this crisis, and they now need to be addressed. In one of his 1998 Journal articles, [Robert] Mundell wrote that the rules on fiscal deficits and public debts in the Stability and Growth Pact—adopted by euro-zone countries to govern the single currency—needed bite to guard against the obvious free-rider problem: Countries would be tempted to take advantage of a colossal and low-interest bond market believing that "when the chips are down the union will act as lender of last resort." He essentially predicted the problems of Greece and the proposed EU-IMF bailout.

Fines were decreased and the stability pact was never seriously enforced. Germany and France, which pushed hardest for strict penalties, were the first to break the rules without suffering any consequences. Five years ago, Berlin and Paris shot down the European Commission's proposal to oversee national statistical agencies to safeguard against Greek-like cheating.

On Tuesday, the Commission plans to unveil proposals on closer surveillance of euro-zone budgets. Next it should restore some teeth to the stability pact. These modest steps won't excite euro federalists as much as a grand and unrealistic political union, but they might do some actual good.