[graeme]

The difference is that in the past, the peripheral countries were able to live beyond their means without such drastic consequences.

Too much debt? Devalue the peseta and drachma. Exports increase, imports decrease, unemployment adjusts. Lenders knows that they must charge higher interest rates to those countries.

That process can't happen anymore. So the same behavior that was mildly damaging before suddenly became very, very damaging. Neither Southern nor Northern European leaders fully recognized this problem when they created a single currency.

[dpe82]

Some recognized the problem, but they were largely shouted down. The single currency has always been a political initiative, not an economic one.

[Someone]

I think they fully realized the problem, but did not think it's consequences through enough; there were (and are) fairly stringent rules for entry to the euro zone (http://en.wikipedia.org/wiki/Euro_convergence_criteria), but were lax in enforcing those rules. There are several reasons for that. Let's say the economy of X is down because it is inherently weak. Do you fine them because of it? Do you think that would help their economy? Also, if half the economies are breaking the rules, how are you going to get a majority in the EU parliament for bringing those fines?