The negative spillovers have been felt all over the euro area during the double dip recession, albeit at different degrees. What can we learn from this crisis? Apart from market-based risk-sharing mechanisms, EMU needs a fiscal framework that combines risk reduction and risk-sharing, in other words: discipline and solidarity.
While the ultimate shape of a genuine EMU will remain a matter of political preferences, it seems essential that some pooling of sovereignty takes place to 2  BIS central bankers’ speeches  ensure (1) sound national fiscal policies, (2) the joint provision of common public goods, (3) a credible backstop to break the vicious circle of weak sovereigns and banks, and (4) a shared emission of safe securities.