Amid fears of dissolution, euro zone leaders are considering going the opposite way: tying member states’ economies closer together. As the debt crisis continues, European leaders are considering a fiscal union that would have been a political impossibility mere months ago, the Wall Street Journal notes. A pact on the table would allow European officials to enforce budget discipline, though there is “a lot of arm wrestling” over how exactly the deal would work, says an insider.
Germany and France are heading the discussion, which could prompt a backlash from countries fearing its implications for their sovereignty. Still, southern European member states are likely to get onboard as they seek aid from the European Central Bank. A deal could be reached in the coming days and take effect early next year. But leaders’ action thus far has been sluggish, says a new report. The debt crisis poses “a key risk to the world economy,” Paris analysts say, and barring quick action, the crisis could “massively escalate economic disruption.” Meanwhile, Moody's is warning of "multiple defaults by euro-area countries" that could lead to some member states' exit.