The separation between fiscal and monetary authorities is optimal if the fiscal authorities are credible and if markets work perfectly and are able to accurately assess the credit risk of each issuer. In this case the market exercises a disciplinary constraint on the public issuers, which have to come to terms with market conditions and contain the debt.
The discrepancy between these two methods does not arise because of any inherent difference in the quality of European and national authorities. It arises because of the inherent difference between rules and institutions in a monetary union. And there are two reasons why I think, going forward, an institution-based approach would work better for the governance of structural reforms.