ABSTRACT
This chapter takes a different angle: focusing on the euro area, it looks back at the genesis and unfolding of the current crisis and draws lessons for future fiscal integration to prevent or minimize the depth of future crises. It outlines a conceptual framework to assess the case for further fiscal integration for the euro area. The chapter analyzes the critical gaps in Economic and Monetary Union (EMU) architecture exposed by the crisis and derives from that analysis the minimal elements of a fiscal union to address them. It looks at the critical gaps exposed by the crisis and in turn into the minimal elements for a fiscal union to ensure that future crises are less severe. The chapter focuses on risk reduction to address government failure and foster fiscal discipline, looks at risk sharing options to insure against country-specific risks, and elaborates on the steps to dampen spillovers and stem contagion. It concludes with a benefit and cost analysis.
