The global financial crisis which erupted in the United States instantaneously swept across Europe. Like the United States, the European Monetary Union (EMU) was ripe for a crash.
It had its own real estate bubble, specifically in Ireland and Spain, indulged in excessive deficit spending, financially deregulated, and rapidly expanded credit (partly through derivatives).1 Policy responses and recovery patterns for key EU members like Germany, France (within the Eurozone) and the United Kingdom (outside the Eurozone) were similar.

However, after the bubble burst and the crisis began unfolding it became clear that the Eurozone plight differed from America's in one fundamental respect. There was no exact counterpart of Eurozone PIIGS (Portugal, Italy, Ireland, Greece and Spain) in the United States. Some American states had over-borrowed, but the sovereign debt crisis didn't place
individual states at deflationary risk, or threaten the viability of the federal union. Not so for some members within the Eurozone. During the US savings and loans crisis in the 1980s, the American south-western states received a transfer from the rest of the US states equal to almost 20 percent of their gross domestic products. But, such a transfer has not been
politically feasible within members of the EMU. The American experience therefore demonstrates that Europe’s problem is not a pure economically failing single currency area; the failure is political in an institutional sense. Politicians on both sides of the Atlantic can be uncooperative, but inter-state disputes are more easily finessed under the American federal system than the Eurozone politically weakly integrated system.

The disparity is easily traced to the EU's and Eurozone's special form of governance called "supra-nationality" (a partially sovereign transnational organization) that has been largely ignored in economic treatises about the costs and benefits of customs unions, economic communities, and monetary unions.2 Until now, it has been tacitly assumed either that supranational governance was as good, or better, than national economic mechanisms; that any policy regime accessible to nation states could be replicated without dysfunction by supranational communities.

The full article as a P​DF file​