Paul Krugman: An Impeccable Disaster
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The trouble with the Eurozone seems to me that to any but the most hardboiled ideologues, it is obvious that significant stimulus is needed in the affected countries (perhaps combined with other measures, like strengthening the tax collection bureaucracy in some cases). The problem is how to get the stimulus there.
The countries themselves cannot do it because the financial markets won't let them, and the other countries hesitate to do it because of the collective outcry over taxpayers bailing out another country.
The ECB is filling the gap for now, but it doesn't really have the political mandate to make pseudo-fiscal decisions like buying a country's bonds.
To me, the solution seems obvious: Give the power of monetary sovereignty to the European Parliament. Since the MPs there are elected directly by the European people, they are the natural wielders of sovereign power when it comes to the Euro. Giving this power to the EP is even possible without taking any rights away from the individual countries, because right now, no one has monetary sovereign power in the Eurozone (unless you count the ECB, but again, they don't really have the political mandate).
Unfortunately, this possibility is not even being discussed yet, and there are significant political egos on the national level that need to be overcome before it can be implemented.
Yes, Eurozone has problem that they have single currency but no single political institution and your solution is theoretically correct but practically you have two choices:
1) you would need to force Great Britain, Sweden, Norway, Denmark and maybe some other countries (e.g. I'm not sure about Czech Republic) to use Euro. A lot of other countries would be happy to accept Euro - especially Eastern Europe countries. I would be happy personally :-) But those countries do not fulfill Euro convergence criteria (http://en.wikipedia.org/wiki/Euro_convergence_criteria). Accepting those countries just as is will have big negative impact to Euro.
2) Or let non-Euro countries to decide Euro destiny. That does not sound good either.
Therefore your obvious solution looks more like edge case solution.
Before some time I have tried to compare USA to EU: http://news.ycombinator.com/item?id=2725696
It is quite interesting that EU and USA can be compared but different structure of economies show why USA is in better/different position.
[1] http://www.guardian.co.uk/business/2010/mar/04/greece-sell-i...
Not saying it is wrong, but it seems to me merely pumping money into a country is not a surefire way to solve all problems.
From http://www.npr.org/blogs/money/2011/09/09/140342690/the-frid... :
It goes back to the years after World War I, when Germany experienced one of the most catastrophic bouts of hyperinflation in the history of the world — an economic disaster that helped lay the groundwork for the rise of the Nazis.
So when Germany joined the euro, the Germans insisted that the newly created European Central Bank be bound by strict rules aimed at preventing inflation.