&gt; It&#x27;s hard to imagine the alternative: an effective and formal HFE mechanism being agreed.<p>I believe a fiscal union is the only viable resolution to this crisis - any dissolution of the euro would look like a huge defeat for European politics from which Brussels wouldn&#x27;t recover for decades. You are right that a fiscal union is very hard to imagine - because it would undermine national sovereignty even more. That&#x27;s why I believe we will see the usual European approach to this problem: Misusing existing institutions like the ECB to create a &quot;quasi fiscal union&quot; (for example by guaranteeing rates for government bonds of poorer countries). It would work almost like a real fiscal union but its true nature would be somewhat hidden behind misleading nomenclature, complex and indecipherable legal agreements and new institutions with fancy names. It&#x27;s a very schizophrenic situation, because every EU official knows that creating a fiscal union (of sorts) is inevitable for the survival of the Union, while at the same time promoting such an idea would be political suicide for any government in the wake of recent nationalistic movements.