Euro crisis

Euro pros-
Elimination of exchange rate between individual European countries.
Increased trade between European countries
Increased cross border employment
Simplified billing on cross border trade
Lower transaction cost in trade ( no need to change currency everytime)

Euro cons-
Common currency without common monetary and fiscal prudence is a recipe for failure. They needed to implement converging style of budgeting. Common Euro rested on 3 pillars - no bailouts, no monetization of debt, no crazy budget deficit. Fiscal indiscipline brought euro debt crisis.

In US common govt balances growth inequity in states. Slump facing region will get higher benefits & low tax and vice versa. But in Europe German dont want to loose out hard earned money to salvage PIIGS (portugal, ireland, italy, greece and spains) countries.

Euro crisis vs Lehman
Greek default could be Europes Lehman moment, is dreaded to- as in autumn 2008 send financial shocks waves around the world and trigger another global recession.
Comparison is rather stretched. In 2008 the bad debt was widely distributed across private sector whereas the dodgy public debt in euro is concentrated among a few sovereign borrowers. Much of fear in 2008 because of uncertainty about valuation and exposure, whereas the sovereign losses on banks are well identified. The risk is concentrated in major European bank and it can be controlled in time by proactive Govt fund infusion.

The issues at hand :
The problems are banking (banks are grossly under capitalized), growth (some european countries like greece are seeing negative growth), and fiscal ( european extravagance and trade imbalance).

Solutions thought so far:
Creating a Europe rescue fund (European Financial Stability Fund) with a strength of 440Billion Euros that can be extended to 2 trillion Euros to step up european stability. The quest is rooted in belief that fund of this scale will be instrumental in combating contagian fears.
Other way is to strengthen banks (recapitaliza banks) so that they can sustain greek default.

Matter copied from various news articles:

European union has 27 members but eurozone has 17 members. The 17-nation eurozone agreed Monday to lend 150 billion euros ($195 billion) to IMF to help troubled European banks.

European leaders want to boost the crisis-fighting resources of the International Monetary Fund (IMF) by the provision of up to 200 billion euros ($260 billion), as one of the ways to persuade markets that money invested in euro zone debt is safe.The aim is for euro zone countries to provide 150 billion euros from their central banks and for other European and non-European countries to provide a further 50 billion euros.

The €440 billion lending capacity of the Facility may be combined with loans up to €60 billion from the European Financial Stabilisation Mechanism (reliant on funds raised by the European Commission using the EU budget as collateral) and up to €250 billion from the International Monetary Fund (IMF) to obtain a financial safety net up to €750 billion.

he €110 billion bailout to Greece of 2010 is not part of the EFSF guarantees and not managed by EFSF.  european central bank administers the monetary policy of ECB. Objective price stability within eurozone.  gdp of italy, europe's third largest economy dropped by 0.2%

The European Central Bank will offer three-year funds to banks for the first time on Wednesday, an effort to counter the freeze in interbank lending. France hopes banks will use the money to buy euro zone bonds but with banks under pressure to reduce risk and rebuild capital that may be a vain hope.