In countries such as Latvia and Hungary, a lot of people borrowed money in euros to buy property. They may have thought of themselves as property investors but, whether wittingly or not, they also took on a sideline as players in the foreign currency markets. The lower interest rates charged on euro mortgages seemed to make the investment model worthwhile, but those euro interest rates were lower for a reason.
With the explosion of the property bubble and collapse in their domestic currencies, those investors are now left with apparently unpayable debts. What can be done?
If there is a simple default, the pain passes to those banks that lent the money, many of whom are Swedish and Austrian. That way, contagion spreads throughout the EU.
The alternative is that the pain must be spread. The rogues and fools must not profit from their mistakes, but the aim of policy should be to unite Europe, not to divide it.
I have remarked before that the collapse of the free market fundamentalist economic model in the last two or three years is as significant an event as the collapse of Communism and the fall of the Berlin Wall. It requires the same creative efforts that Robert Schuman spoke of in his declaration 60 years ago.