Despite the progress that European leaders have made in bringing financial stability to the eurozone, the European Union continues to face a severe economic and political crisis. This crisis has not only threatened the viability of the single currency, but also fostered political tensions that are weakening the foundations of the European project. Economic troubles emerged from financial mismanagement, unsustainable public debt, and the lack of structural competitiveness in the southern tier. Economic missteps developed into political fragmentation, pitting wealthier member states in the north against weaker economies in the south.
Economic dislocation has combined with political division to awaken widespread public skepticism about the merits of European integration. European leaders have responded to this crisis by combining fiscal consolidation with a credible roadmap for banking and fiscal union, a step meant to provide the euro with the collective oversight and enforcement mechanisms it needs – and should have had when it was first introduced.
Meanwhile, periphery countries have made significant strides in reforming their economies and reducing their fiscal deficits.But the crisis has left a legacy of vulnerable banks and unsustainable levels of government debt in many countries. More rapid progress toward fiscal and banking union is needed in order to establish the conditions for a return to growth that is essential for exiting the crisis. Accelerating integration, however, will be no easy task. The austerity being doled out to put Europe's house in order is undermining the readiness of European publics to accept the deeper union that is needed to redress Europe's economic woes.