Europe's escalating debt troubles have forced the 17 euro-zone governments to begin serious talks over something that has until now has been strictly theoretical—how to turn their common currency area into a full-fledged economic union, The Wall Street Journal reported. That goal, which will entail euro-zone nations taking on responsibility for other countries' budgets and banks, lies far down a path that is beset by multiple, potentially fatal pitfalls. But hitherto unwilling governments are beginning to talk about a road map to economic union, because they fear if they don't, the euro may not survive. European Central Bank President Mario Draghi on Wednesday called on euro-zone leaders to draw up a long-term vision for their union at their summit at the end of June and spell out "all the conditions that need to be satisfied in order to achieve this objective." That follows Europe's last get-together, when leaders commissioned the European Union's top officials to set out the main building blocs needed for deeper economic and political integration in the currency union. The issue has come to a head as Spain, the euro zone's No. 4 economy, appears to lack the ability to raise money to recapitalize struggling banks, refinance its debt and support spending. Such problems could be more easily tackled if the euro zone could combine its financial muscle. Together, the 17 euro countries have a debt load that is below that of the U.S. If the euro zone were a real federation, strong countries like Germany, the Netherlands or Finland could prop up weaker regions, as rich U.S. states help out poorer ones through federal taxes. Such a union could borrow jointly on international bond markets at less of a penalty than the likes of Greece, Spain and Italy now pay. But Berlin, the euro zone's main economic driver, has made clear that it won't consider putting its money on the line without much tighter euro-wide controls over how governments spend their money and manage their banks. Read more. (Subscription required.)
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