European federalism is not dead yet

A dispassionate analysis of the eurozone’s options published last year by the Centre for European Reform concluded that a strengthening of fiscal federalism represented the best way of completing the eurozone’s ramshackle edifice — even if at the time that appeared to be politically impossible.

The report sketched out three other possible scenarios: a German-led Europe run by creditor nations; a technocratic currency bloc run by Brussels bureaucrats and central bankers; and a more flexible, decentralised eurozone. It argued that all these alternatives were less economically viable than fiscal federalism — and in different ways might prove just as contentious. Some European officials have reached similar conclusions. In an interview with the FT last month, Pier Carlo Padoan, Italy’s finance minister, argued that the eurozone ought to respond to the Greek crisis by moving towards political union.