Nope, that's not a smile:
Chart via Paul Krugman, who links to a George Soros speech that's getting a lot of attention, mostly because the famous currency speculator is now arguing that "the euro crisis threatens to destroy the European Union." The Soros speech is full of blame on Germans and calls for more centralization and debt forgiveness, but this is a helpful passage on the insanity of the convergence illustrated above:
When the euro was introduced the regulators allowed banks to buy unlimited amounts of government bonds without setting aside any equity capital; and the central bank accepted all government bonds at its discount window on equal terms. Commercial banks found it advantageous to accumulate the bonds of the weaker euro members in order to earn a few extra basis points. That is what caused interest rates to converge which in turn caused competitiveness to diverge. Germany, struggling with the burdens of reunification, undertook structural reforms and became more competitive. Other countries enjoyed housing and consumption booms on the back of cheap credit, making them less competitive. Then came the crash of 2008 which created conditions that were far removed from those prescribed by the Maastricht Treaty. Many governments had to shift bank liabilities on to their own balance sheets and engage in massive deficit spending. These countries found themselves in the position of a third world country that had become heavily indebted in a currency that it did not control. Due to the divergence in economic performance Europe became divided between creditor and debtor countries.
Soros basically argues that the Euro has about three months to get it together. If not….
[T]he gradual reordering of the financial system along national lines could make an orderly breakup of the euro possible in a few years' time and, if it were not for the social and political dynamics, one could imagine a common market without a common currency. But the trends are clearly non-linear and an earlier breakup is bound to be disorderly. It would almost certainly lead to a collapse of the Schengen Treaty, the common market, and the European Union itself. (It should be remembered that there is an exit mechanism for the European Union but not for the euro.)
Re-read Johan Norberg's May article in Reason: "Financial Crisis II: European governments fail to learn from history."