For a fragile Europe to change fast, it needs to understand much better what caused its problems.

Sir, Martin Wolf ask us to “Consider how much better off Europe would have been if the exchange rate mechanism had continued, instead, with wide bands. Interest rates in the crisis-hit countries would probably have been higher and asset price bubbles and current account deficits smaller”, “A fragile Europe must change fast” May 23. 

Indeed Wolf is right, but only partially. He still stubbornly, no matter how much I explain it to him, refuses to consider that much more important than the Euro, for the construction of bubbles and deficits were the minuscule capital requirements for banks when lending to what was officially perceived as safe. 

Has Wolf for instance completely forgotten the over 1 trillion in Euros that where invested in triple-A rated securities backed with lousily awarded mortgages to the subprime sector, and which required only 1.6 percent in capital of the banks, the same minimal capital requirement as when lending to Greece? What on earth had that to do with the Euro?