The challenge of a fiscal union for the euro zone

EU Heads for Eurobond Clash Over Fiscal Union

By James G. Neuger

European ratification of a reinforced crisis-management fund will act as a prelude to an even more divisive debate: whether to put more money into the pool and use it to borrow on behalf of all 17 euro states.
The question of “eurobonds” or “fiscal union” -- toxic language in northern countries like Germany -- will force itself onto the agenda once the retooled rescue fund is in place as soon as next month.
The trigger will be a European Commission feasibility study of jointly sold eurobonds, seen by a growing number of economists as the only way of guaranteeing to the markets that countries such as Italy won’t go bust. Unprecedented bailouts by governments and the European Central Bank have so far failed to stamp out the crisis that is menacing the region’s core members.
“No single currency has ever survived without some form of debt mutualization,” said Simon Tilford, chief economist at the London-based Centre for European Reform, a research institute focused on European integration. “There’s an increasing recognition that that is the only way of stabilizing the euro zone.”
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Comment: Whether the eurocrats or the common folk like it or not, the fiscal union has become unavoidable.