Explores how the monetary-fiscal institutions of the euro were set up andhow they have evolved over time, analyzing the fragility of the contemporaryeuro and suggesting ways to fix its architecture. Examines policy as beingencoded in expectations, rules, regimes, institutions, commitments, norms,and traditions. Looks at the design of the Economic and Monetary Union setout in the 1992 Treaty of the European Union. Describes the monetary-fiscalinnovations to the institutions of the euro taken in response to crises andhow they overturned the separation of monetary, fiscal, and financial policythat existed at the euro's outset. Explains how the concentration ofsovereign debt in domestic banks contributed to the depths and costs of thesovereign debt crisis. Considers how the mechanisms to offer fiscal supportwith conditionality during the sovereign debt crisis evolved toward apermanent institutional structure, highlighting how a slowing down of thesereforms has left monetary policy more exposed in fighting subsequent crises.Assesses fiscal implications for the European Central Bank (ECB) of policiessuch as interest rates below zero, forward guidance about future interestrates, expanded lending to banks at low rates and with easy collateral, andmassive asset purchases, primarily of government debt. Investigates theissuance of joint European debt to finance cross-border fiscal transfers, amajor fiscal innovation at the EU level implemented during the COVID-19pandemic. Reflects on lessons for institutional reform illustrated by threeinflation stories. Addresses negative consequences of a reliance on ECBintervention by sovereigns, bond investors, market participants, banks, bankregulators and creditors, financial institutions, and governments. Promotesthe argument that EU member states should retain sovereignty over most fiscaland economic policy.
