The current model of central banking is facing its biggest challenge yet - the threat from excessive government spending and borrowing. Governments that persistently run large deficits and pile up debts beyond the country's capacity to service them inevitably undermine the central bank's ability to operate a stability-oriented monetary policy.

Nowhere does this danger loom larger than in the euro area. Admittedly, the euro is not the only major currency under threat from fiscal indiscipline -