One recent estimate finds that between 1999 and 2014, total risk-sharing through both public and private channels in the United States smoothed 57% of country-specific shocks, compared with just 29% in the euro area.8 This greater degree of risk-sharing derives not just from federal fiscal transfers, but also from greater risk-sharing through credit and financial channels.
Credit provision dried up in certain countries during the crisis at precisely the moment when it was needed to smooth income shocks. Clearly, deeper financial integration is needed.