The controversy continues to simmer around the Reinhart-Rogoff paper. The re-examination should go a step deeper and ask why anyone ever took their argument seriously in the first place. It's not just the arithmetic on debt-to-GDP ratios that tripped up Reinhart and Rogoff.
By fixing annual budget deficits, Europe is shooting itself in the foot: while it does, of course, authorize lower budget deficits during good years, it makes it impossible to allow further budgetary deficits when the economy is in recession. Europe is in recession.
As European bank depositors, bank creditors and bank stockholders look back nervously at what happened recently in Cyprus, there is increasing speculation about what might happen to Slovenia and even some other European countries in relation to bank restructuring.
The wages of sin -- in the minds of Europe's born again Puritanical elites who observe the caveat that financial elites have a special dispensation from the Heavenly Father who already have squeezed through the eye of the needle.
We are now watching the second botching of a Cyprus rescue in less than a month. The implications cannot be good for Cyprus... and for Europe as a whole.
I was struck by what came out of the Troika this week after it finished negotiating the program with the authorities in Cyprus. This is not the first time officials bungle an element of the Cypriot rescue.
The state and the market have long been in a tug of war in East-Central Europe. The Communists were not the first political force to recommend that the state play a much larger role in the economy.
Wherever they look, Cyprus and its European partners are running out of easy options. Rather than seek additional short-term palliatives, they would be well advised to invert their operational logic.
The role of the Troika in bailing out governments and banks is nothing new, but the solutions put forward by EU leaders to improve the Cypriot crisis seem to be founded on little foresight, and without regard for the tragic mistakes of the past few years.
Unless you're a student of history or are planning a Mediterranean vacation, you may never have given the island of Cyprus much thought. Then suddenly, it dominated the headlines. What does a banking crisis in a small and far-off land mean to you?
After marathon and heated discussions, agreement was reached on a new rescue package for Cyprus. Compared to what had emerged a week earlier, this is a better technical outcome -- both in what it contains and in what is left out.
Instead of an impotent superhero in spandex lacking legitimate powers or weapons, Europe might call up the likes of Batman and Robin, Green Lantern or Flash to protect its prized democratic peace. So... keep the Euro, fire the Captain.
The Cypriot banks did what all banks do. They gambled. They borrowed money by taking in deposits as well as selling bonds, promised to repay, and then invested in assets they were sure would pay off. These assets included lots and lots of Greek government bonds.
Didn't someone around the table in Brussels raise their hand and say, "Hey, wait a sec... do we really want to levy this tax on a banking system that's already teetering?"
Europe has more than an immediate economic and financial interest in working with Cyprus to stabilize an increasingly volatile situation. And it should do so driven less by the need avoid an institutional Eurozone exit and more by the importance of fundamentally restoring growth and hope to Cyprus.
As they scramble to sort out the mess in Cyprus, European officials would be well advised to constantly remind themselves of a reality that I suspect extends across the continent: Despite all the happy talk about smaller deficits and lower sovereign credit spreads, citizens are yet to feel any notable improvement in their actual standard of living and in their prospects. Day in and day out, this situation undermines the population's confidence in the timely responsiveness of their elected representatives, the political system and traditional political parties. The longer this persists, the harder it will be to pivot to the type of policy reforms needed to decisively avoid more years of economic difficulties.