A successful European banking union will also relieve the ECB of some of the tasks undertaken during the crisis and the need for non-standard measures. Moreover, financial market integration helps smooth the effects of asymmetric shocks through income insurance when a country’s residents hold claims to dividends, interests and rental revenue from other countries.
In the US, such risk sharing has been shown to be far more important than federal budget transfers. Some final reflections Talking about flaws in EMU’s design is a bit reductive. It certainly doesn’t capture the depth of the “repair work” going on in Europe and the euro area in particular.