Dealing with Deconvergence

Judging by the way the euro tumbled as much as 3% on currency markets last week, you might think that voters in France and the Netherlands had voted against the six-year-old European currency, rather than the planned new E.U. constitution. Propelling the decline was a report — quickly denied — in the German newsmagazine Stern that Finance Minister Hans Eichel and Axel Weber, the head of the German central bank, had discussed the prospect of dissolving Europe's monetary union at a meeting in late May. Weber dismissed the report as "absurd," and most market watchers and economists agreed. "The talk will...