International Security

"Despite its past achievements, the EU now suffers from growing tensions and several self-inflicted wounds. The EU is likely to experience repeated crises and internal divisions, and one cannot rule out a gradual and irreversible decline in its cohesion and influence. Because a prosperous and tranquil Europe is in America's interest, this is not good news for the United States."

"Banking regulation may not be the most voter-friendly topic. Yet the reality is that the best way to create employment in the periphery is by ending the fragmentation of the financial system that continues to plague Europe. As long as Greek, Portuguese, Spanish or Italian entrepreneurs need to pay a premium of between 4 and 6 percent above what their German counterparts pay on bank loans, how can they possibly start new businesses?"

"To argue that 'Mr Monti promised reform and ended up raising taxes' is to grossly misunderstand an imperfect but positive labour reform, pension changes and progress on competitiveness, tax evasion and corruption."

European Central Bank (ECB) President Mario Draghi's Outright Monetary Transactions (OMT) gives the populists' opponents a new weapon: support while structural reform takes hold. As he implied on Thursday, purchases are rewards for the countries implementing good reforms. Conversely, the ECB can stop OMT if it judges national policies to be "deserving" of punitive rates. Draghi should not hesitate to use this power to preserve credibility: while monetary policy operates within democracy, it is not itself be democratic.

"Decline is a misleading metaphor that assumes there is an organic life cycle for countries as there is for individuals. We know little about the life cycle of states. It took three centuries for the Western Roman Empire to decline from its apogee to collapse. After Britain lost its American colonies in the 18th century, writer Horace Walpole lamented that Britain was reduced to the insignificance of Sardinia. He missed the fact that the Industrial Revolution was about to produce Britain's greatest century. Put simply, we do not know where the United States is in its supposed life cycle."

"With all its imperfections, Europe today is the largest single market in the world, featuring effective anti-trust regulations, curtailing economic nationalism, and promoting free trade agreements with counties as far away as Asia and Latin America. New potential members are eager to join, from booming Turkey to crisis-ridden Iceland. Despite all the talk of stalling, Turkish membership will eventually come to pass."

"As the U.S. gears up for an important presidential election, Argentina is a sad reminder of how crony capitalism is the enemy of genuine development."

Pierpaolo Barbieri, Ernest May Fellow at the Harvard Kennedy School's Belfer Center, says that "big, international banks like Santander and BVA are well diversified. Of the others, quite a few need capital — but how much? That's the unknown and Bankia has undermined faith in financial reporting."

"From the perspective of Brussels and Berlin, maddening though Athens may be, there is no alternative but to double down on Greece — because a Greek exit would have huge ripple effects through all the Mediterranean economies (and their banking systems). More importantly, structural reform is still worth pursuing — opening up the professions, reforming the public sector, and liberalizing an economy that only benefits insiders are laudable goals."