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Debt Without Drowning

LONDON – Since the 1970’s, economists have warned that a monetary union could not be sustained without a fiscal union. But the eurozone’s leaders have not heeded their advice – and the consequences are becoming increasingly apparent. Europe now faces a difficult choice: either fix this fundamental design flaw and move toward fiscal union, or abandon the common currency.

Choosing the latter option would have devastating consequences. Indeed, while the desirability of establishing a monetary union may have been open to question in the 1990’s, dismantling the eurozone now would trigger profound economic, social, and political upheaval throughout Europe. To avoid this outcome, Europe’s leaders must begin designing and implementing strategies aimed at bringing the eurozone closer to a fiscal union.