Reluctantly,Europe inches closer to a fiscal union

The message was clear: join together in a stronger union,or risk collapse.

The story of Americas failed early effort to operate as a loose confederation of 13 states is increasingly relevant for many European officials who are grappling with the drastic problems of their own flawed 17-nation currency union. The lack of strong central coordination of the euro zones debt and spending policies is a key reason Europe has been unable to resolve its financial crisis despite more than 18 months of trying. And that is why,despite all the political obstacles,Europe appears to be inching closer to a more centralised fiscal union that would eventually turn the euro zone into something resembling a US of Europe.

If todays policy makers want to successfully stay the course,they will have to press ahead with structural changes and deeper economic integration, António Borges,director of the International Monetary Funds European unit,said during a recent speech. To put the crisis behind us,we need more Europe,not less. And we need it now.

Nothing happens quickly in Europe,however. For the most part,such efforts are still being conducted behind-the-scenes and many of the ideas have yet to hit official agendas or the public arena. But several longtime financial and central bank officials and staff members said there had been a substantial step-up in planning for a closer European fiscal relationship to match the unified monetary union under which the euro zone has operated for more than a decade. For now,officials are mainly talking in public in generalities.

The crisis has clearly revealed the need for strong economic governance in a zone with a single currency, Jean-Claude Trichet,president of the European Central Bank,said on Monday. I think that European nations will create a confederation and we could then have a confederal finance minister,whose mission would be the surveillance of the entire zone,and who would be able to impose decisions, on governments in breach of euro zone rules.

Officials said a major overhaul of the way Europe conducts fiscal policy coordinating government spending,taxes and deficits was likely to take a long time and require further changes in the treaties governing the euro. But they pointed to the smaller changes that were already taking place as evidence that euro area financial ministries see that they have little choice but to move together.