The resignations of Greek Prime Minister George Papandreou and Italian Prime Minister Silvio Berlusconi have highlighted how Greece, Italy and many other countries obscured for too long their bloated public sectors' long-standing problems with unsustainable social-welfare benefits. Indeed, for many of these countries, meaningful reform has now become unavoidable.
The social-insurance systems in Europe, as in the United States, Japan, and elsewhere, were designed under vastly different economic and demographic circumstances — more rapid economic growth, rising populations, and lower life expectancy — from those prevailing today. Governments have promised too much, to too many, for too long.
This fundamental problem has now manifested itself in these countries' unsustainable debt dynamics. Euro membership, which temporarily enabled massive borrowing at low interest rates, merely aggravated it.