Frankel, Jeffrey A. "The Euro Crisis: Where to From Here?" HKS Faculty Research Working Paper Series RWP15-015, March 2015.
Germans cannot agree to unlimited bailouts of euro members. On the other hand, if they had insisted on the founding principles (fiscal constraints, “no bailout clause,” and low inflation as the sole goal of the ECB), the euro would not have survived the post-2009 crisis. The impact of fiscal austerity has been to raise debt/GDP ratios among periphery countries, not lower them. The eurozone will endure, but through a lost decade of growth. It would help if the ECB further eased monetary policy, which it could do by buying US treasury bonds rather than eurozone bonds. Still needed is a long-run fiscal regime to address the moral hazard problem. Two worthwhile proposals are blue bonds and the delegation of forecasting to independent fiscal agencies.