I recently referred to a paper by Sergio Cesaratto on the Euro Area crisis. There is another paper, Alternative Interpretations Of A Stateless Currency Crisis, written for the Cambridge Journal Of Economics, written last year which I somehow missed referring on this site.

CJE link (no paywall at the time of writing), Wayback Machine link.

Abstract:

A number of economists warned that a political union was a prerequisite for a viable currency union. This paper disputes the feasibility of such a political union. A fully fledged federal union, which would likely please peripheral Europe, is impracticable since it implies a degree of fiscal solidarity that does not exist. A Hayekian minimal federal state, which would appeal to core Europe, would be refused by peripheral members, since residual fiscal sovereignty would be surrendered without any clear positive economic and social return. Even an intermediate solution based on coordinated Keynesian policies would be unfeasible, since it would be at odds with German ‘monetary mercantilism’. The euro area is thus trapped between equally unfeasible political perspectives. In this bleak context, austerity policies are mainly explained by the necessity to readdress the euro area balance-of-payments crisis. This crisis presents striking similarities to traditional financial crises in emerging economies associated with fixed exchange regimes. Therefore, the delayed response of the European Central Bank (ECB) to the sovereign debt crisis cannot be seen as the culprit of the euro area crisis. The ECB’s monetary refinancing mechanisms, Target 2 and the ECB’s belated Outright Monetary Transactions intervention impeded a blow-up of the currency union, but could not solve its deep causes. The current combination of austerity policies and moderate ECB intervention aims to rebalance intra-eurozone foreign accounts and to force competitive deflation strategy.

As the abstract says, the ECB alone cannot resolve the crisis.

I agree almost everything in the paper except that in my opinion, a political union—a central government—is the only way to solve the Euro crisis. But Sergio’s arguments about his view are solid.