Any time you talk about a contagion, it’s sensible to ask: where did the infection come from? The European debt crisis may look like it started in Greece, but really it began with the Stability and Growth Pact, the final framework of the European Monetary Union (EMU) that gave us the euro. That agreement is just too rigid to allow for the kind of fast, coordinated action necessary in a crisis. And because it launched the joint currency without any kind of federal transfer system, it made the new currency unsustainable. The euro’s founding framework thus contained the seeds of instability.

What’s really surprising about recent developments is that the imbalances in the euro-zone have caught the world by surprise. The recent trillion-dollar rescue package calmed the markets, at least for now, but it also highlights the level of imbalances in Europe. The fact that this rescue package took the better part of four months to construct underscores that the monetary and fiscal institutions in the euro-zone are not conducive to a single currency. The euro bailout is the product of what a federal government could construct in days. The austerity measures that will accompany the program at the hands of the IMF and a politically reticent Germany will do little more than choke off growth and fuel political discontent in Greece. While that may make investors happy for now, faith will quickly shake when protests rock reforms or stagnant numbers surface among the PIIGS.

The level of the required bailout should raise more concerns than it ameliorates, as investors look around at where risk is held. The popular recent analogy to U.S. toxic assets is not a perfect one, especially as the euro-zone has fewer institutions capable of stepping in to calm markets. At the end of the day, Europe has put its currency union ahead of its political union. Until Europeans are willing to cede greater autonomy to a federalized body (a development as likely as the formation of an EU soccer team), this process of fear and bailout is doomed to repeat itself. The question is whether the next of the PIIGS to follow Greece to the slaughter will be too-big-to-save.