In writing a comment over at Sumner's Money Illusion it occurred to me that Europe's problem is it needs to go all the way or disband the Euro zone. What is killing them is a bad structure. The Euro countries are in this strait jacket where they still function as totally autonomous countries with their own GDP and their own fiscal policy, etc, yet they have given away the power to print money.
This is now in the power alone of the ECB, which is reluctant to use it's power too much. They have the worst of both worlds. No one country can have the effect on the ECB's decision making that they could if they had their own central bank, as Britain continues to do-Britain looks smart now of course-with all their problems at least they don't have this one.
Because of how politically controversial the entire Euro project has been from the outset, the proponents didn't want to push for too much too fast, the result of which, is a kind of halfway house where we have some integration but not enough. In reality either Europe should go back to purely national economies where everyone prints their own money or they should integrate much more than they have so that the ECB is as responsible for the monetary policy of the Euro zone as the Federal Reserve is for the U.S. or the Bank of England is for Britain.
The trouble even then-and achieving anything like this is a daunting task to say the least with all the political opposition it will foment-is that even then the ECB would be only able to focus on the Euro zone has a whole, It couldn't give the level of individual attention that a national central bank can on it's own country-after all, maybe for example, Greece might need more monetary stimulus but Germany emphatically doesn't. For this reason it would require a much higher level of economic integration as well as political where the concern over a loss of national sovereignty would be back with a vengeance. But the real catch-22 is the more any agreement gives due deference to concerns about national sovereignty, the more each country will be disempowered from having its own monetary policy.
While this makes each country feel like it is still severeign in reality they already aren't, they are shells of their former selves.