EUROZONE: Market meltdown lays bare Europe’s divisions.

While the years since the debt crisis have seen the 19 countries in Europe’s euro area centralise and toughen bank controls, many planned economic reforms in Italy and elsewhere were watered down as vast money printing buoyed the economy.

Spurred by fears higher borrowing costs will choke economic growth, the markets rout has exposed cracks in the uneasy alliance which – unlike the United States – is held together largely by the central bank rather than a government with power to tax and spend.

Two events this week expose the fragility of the union: the ECB’s efforts to restore confidence in weaker states facing surging borrowing costs as its debt-buying programme ends, and ministers’ decade-long failure to put the bloc’s savers on a solid footing.

After a rare emergency meeting on Wednesday (15 June), the ECB promised fresh measures to temper the market selloff but the lack of a concrete plan to help debt-laden countries like Italy and Greece disappointed some.

With EU inflation running over 8%, Europe isn’t going to be able to paper over another crisis, so to speak.