Namely, the euro area will not survive by simply becoming a federation or transfer union – but neither will it break up just because of not becoming one. Life is seldom black-and-white. Instead, there is an evolutionary third way – what we need is both a sense of direction and a sense of realism.
The essential guiding principle in reforming euro area economic governance should be that steps towards increased solidarity through co-insurance and risk sharing are combined with increased responsibility and economic sustainability. Solidarity can only be built on solidity, for the sake of both economic sustainability and political legitimacy.