ABSTRACT
The process of reforming the eurozone should start with its institutions. It should create institutions that mitigate the commitment problem as much as possible. The euro crisis was caused by overly lax banking regulation, ineffective sovereign debt rules, and a lack of institutions able to deal with crises. Due to the absence of a strong central eurozone government, the heads of national government and the ministers concerned seek solutions in the form of multilateral agreements. Europeans need to learn a lesson that has long been a consensus view in international development aid: the ability to influence sovereign states’ policies from outside is very limited, despite the fact that European Union membership is meant to imply a form of shared sovereignty. Transfer union and joint liability are just some of the terms used to describe the complex and overlapping relationships between control and accountability that are set to evolve in Europe.
