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I regarded the European Union as the embodiment of an open society – a voluntary association of equal states who surrendered part of their sovereignty for the common good.

The process of integration was spearheaded by a small group of far sighted statesmen who recognised that perfection was unattainable and practiced what Karl Popper called piecemeal social engineering. They set themselves limited objectives and firm timelines and then mobilised the political will for a small step forward, knowing full well that when they achieved it, its inadequacy would become apparent and require a further step.

Unfortunately, the Maastricht treaty was fundamentally flawed. The architects of the euro recognised that it was an incomplete construct: a currency union without a political union. The architects had reason to believe, however, that when the need arose, the political will to take the next step forward could be mobilized. After all, that was how the process of integration had worked until then.

When the Soviet empire started to disintegrate, Germany's leaders realized that reunification was possible only in the context of a more united Europe and they were prepared to make considerable sacrifices to achieve it. When it came to bargaining, they were willing to contribute a little more and take a little less than the others, thereby facilitating agreement.

The financial crisis also revealed a near fatal defect in the construction of the euro: by creating an independent central bank, member countries became indebted in a currency they did not control. This exposed them to the risk of default.

Developed countries have no reason to default; they can always print money. Their currency may depreciate in value, but the risk of default is practically nonexistent. By contrast, less developed countries that have to borrow in a foreign currency run the risk of default. To make matters worse, financial markets can actually drive such countries into default through bear raids. The risk of default relegated some member countries to the status of a third world country that became over-indebted in a foreign currency. 

The emphasis placed on sovereign credit revealed the hitherto ignored feature of the euro, namely that by creating an independent central bank the euro member countries signed away part of their sovereign status.

In retrospect, that was the root cause of the euro crisis.

What happened in Cyprus undermined the business model of European banks, which relies heavily on deposits. Until now the authorities went out of their way to protect depositors

Banks will have to pay risk premiums that will fall more heavily on weaker banks and the banks of weaker countries. The insidious link between the cost of sovereign debt and bank debt will be reinforced.

In this context the German word "Schuld" plays a key role. As you know it means both debt and responsibility or guilt.

If countries that abide by the fiscal compact were allowed to convert their entire existing stock of government debt into eurobonds, the positive impact would be little short of the miraculous.

Only the divergences in competitiveness would remain unresolved.

Germany is opposed to eurobonds on the grounds that once they are introduced there can be no assurance that the so-called periphery countries would not break the rules once again. I believe these fears are misplaced.

It is up to Germany to decide whether it is willing to authorise eurobonds or not. But it has no right to prevent the heavily indebted countries from escaping their misery by banding together and issuing eurobonds. In other words, if Germany is opposed to eurobonds it should consider leaving the euro and letting the others introduce them.

Individual countries would still need to undertake structural reforms. Those that fail to do so would turn into permanent pockets of poverty and dependency similar to the ones that persist in many rich countries.

Second, the European Union also needs a banking union and eventually a political union.

If Germany left, the euro would depreciate. The debtor countries would regain their competitiveness. Their debt would diminish in real terms and, if they issued eurobonds, the threat of default would disappear. 

Experience in Eastern Europe, where energy prices had to be increased substantially in the 1990’s, demonstrated that simple measures – such as better insulation, together with maintenance and repair of the region’s many long-neglected central heating systems – yield a quick and substantial payoff in reducing energy intensity.

The anti-bailout part of the FDP platform is the one part of their rhetoric which could successfully take them over the 5% hurdle. The FDP’s complicity in using German taxpayer money to bail out the so-called profligate periphery is a one-way ticket out of Parliament.

“First, the Greek reports come via statements made by Michael Fuchs, CDU deputy Bundestag head and a senior member of German Chancellor Angela Merkel’s party. Fuchs warned earlier today that Germany would veto further aid to Greece if the country has not met the conditions of its previous bailouts.

“Second, all along Germany has indicated that it is resistant to increasing funding of the ESM and EFSF bailout facilities. This presents a problem in the case of Spain and Italy because of the size of those economies.

The long and short of it was that the Germans had reached the end of their ability to support bailouts.

All evidence is that this levy has created panic in Cyprus. After all, what is the use of having a deposit guarantee if government can arbitrarily circumvent it to impose losses on your deposits anyway?

One can't just blame Cyprus for this fiasco. The ECB, EC and European Union finance ministers signed off on the insured deposit grab too]

My view? It was inevitable that we would be in crisis again. The austerity world view of crisis resolution is completely at odds with the capacity of the euro zone’s institutional architecture to handle a crisis.

Consequently, when onerous rules, such as the prohibition on branch banking prevented banks from financing the emerging giant corporations, markets, assisted by more lightly regulated trust and insurance companies, stepped in.

To remedy these defects, the Federal Reserve System, established in 1913, was to act as a lender of last resort, bringing all systemically important institutions – national banks , large state banks and trust companies – under the federal supervision of the Office of the Comptroller of the Currency or the Federal Reserve banks.

But, they have not converged, especially with regard to state banks that often pressure state regulators.

Surveillance of a bank is not dependent on the geographic scope of its operations, as in the US, but on its systemic significance measured in several dimensions and whether it receives financial assistance from the European Stability Mechanism.

establishing a “two-speed Europe” – in which a core group of countries pursues deeper integration more quickly than the rest – is the EU’s best option for reaching the level of cooperation needed to escape the crisis intact.

Pursuing this option would require that the decision-making process be legitimate. In the Council, as in all cases of “enhanced cooperation,” only participating members have the right to vote. In the European Parliament, by contrast, all 27 EU members participate in the decision-making process, even concerning measures that will affect only the 23 “eurozone plus” countries (the 17 eurozone members and the six that have agreed to the Euro Plus Pact) – a method that could pose a political problem.

the highest-paid European Union officials paid taxes equivalent to about 25 percent of their gross salary.

Unlike European Union officials, the 27 members of the European Commission are political appointees. Their salaries are much closer to those of national leaders like Ms. Merkel, and in some cases may exceed them.

Greece cannot hope to get its deficit under control fast enough to stabilize its debt and attract private lenders. Instead of remaining a permanent ward of Germany and the IMF, Greece should default on its debt, leave the euro zone, and return to a more competitive drachma.

But he should also make it clear that lending against private collateral should not be used by commercial banks to free up funds to purchase newly issued government bonds

As Italy shows its determination and its ability to reduce future deficits, it should be welcomed back to the capital markets.

Two huge injections of cheap three-year loans into the euro zone banking system this year, amounting to 1 trillion euros, bought only a few months' respite.

Conservative German economists led by Hans-Werner Sinn, head of the Ifo institute, are warning of dire consequences for Germany from ballooning claims via the ECB's system for settling payments among national central banks, known as TARGET2.

As long as European monetary union is permanent and irreversible, such cross-border claims and capital flows within the currency area should not matter any more than money moving between Texas and California does.But even the faintest prospect of a Day of Reckoning changes that calculus radically.In that case, money would flood into German assets considered "safe" and out of securities and deposits in countries seen as at risk of leaving the monetary union. Some pessimists reckon we are already witnessing the early signs of such a process.

Either member governments would always be willing to let their national central banks give unlimited credit to each other, in which case a collapse would be impossible, or they might be unwilling to provide boundless credit, "and this will set the parameters for the dynamics of collapse", Garber warned.