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Crisis in Ireland tests eurozone vision of common currency, common interests

The Greece and Ireland debt crises have raised more questions about a currency that was supposed to unify Europe.

Commuters pass through Comercio Square in Lisbon, Portugal. High debt levels there – as in Greece, Ireland, and Spain – have driven borrowing costs to unsustainable levels. Portugal’s latest state budget includes sharp tax increases and deep spending cuts.

Armando Franca/AP

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When the euro was launched 11 years ago, it was celebrated as the culmination of a vision of postwar Europe that was erasing borders and dismantling its nationalistic past. It was heralded as a great unifier of nations with common interests and equally cherished values.

But a series of financial crises is shaking Europe’s core and raising fresh questions about its single currency as well as the solidarity of a union whose cooperation and stability date to the aftermath of World War II.

From the Greek financial disaster earlier this year, to an Irish bank debt crisis that has pushed Ireland to accept up to $120 billion in bailout funds, Europe is struggling to rescue a currency so closely linked to its unity that German Chancellor Angela Merkel recently said, “If the euro fails, Europe fails.”

Mrs. Merkel, who has been dubbed Germany’s new “Iron Chancellor” for her tough approach to Europe’s flagging economies, has been pushing for greater fiscal responsibility in the eurozone. This is the new age of European austerity, after all.

In October, she proposed amending Europe’s unifying Lisbon Treaty to create a permanent bailout mechanism, which would come with requirements that government spending would be cut and taxes raised. Ireland and Greece have been fuming since.

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