This paper applies the ‘failing forward’ thesis to analyse the design, operation and reform of European Union (EU)/Eurozone economic governance to tackle the Covid-19-related crisis of Economic and Monetary Union (EMU). This crisis highlights both spillovers from major asymmetries in EMU and weaknesses in the incomplete economic governance of the Eurozone. We focus in particular on the financial support mechanisms agreed after intergovernmental negotiations in major crisis situations. These reforms represent compromise solutions that reflect well-entrenched disagreements among member states. We explain why more far-reaching responses — notably the adoption of mutualised euro denominated debt, and the generalised use of grants over loans — have not been adopted, despite the severity of the crisis. These reforms fail to address existing asymmetries and contribute to them, thus sowing the seeds of future crises.

Supported by the Paul Sarbanes ’54 Fund for Hellenism and Public Service

University of Luxembourg
University of Bologna