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But even if the ECB could alleviate the immediate financial strains, it can't address the true cause of the euro crisis. The currency bloc is not so much suffering a sovereign debt or banking crisis as a crisis of governance.
ECB intervention without accompanying political reform risks leaving the bloc vulnerable to future instability. The past few weeks have highlighted the extent of Europe's democratic deficit. The self-appointed Frankfurt Group—composed of the unelected heads of the ECB, European Commission, European Council and the International Monetary Fund plus the leaders of France, Germany and Luxembourg—was able to force the Greek and Italian parliaments to agree a take-it-or-leave-it list of radical fiscal and structural reforms under pain of national bankruptcy, thereby averting an immediate catastrophe. But the Frankfurt Group cannot provide the political, constitutional and democratic cover required for the ECB to accept the role of lender of last resort being urged upon it.
What the ECB is being asked to do is provide an open-ended commitment to subsidise Italy's debts by agreeing to underwrite the risk of default. That is a major transfer of fiscal sovereignty that will de facto make all eurozone countries henceforth responsible for each other's debts. Even if the ECB had the legal power to assume this responsibility under the European treaties, which it says it doesn't, it has no means to ensure countries stick to reform programmes and thus minimise the risk of losses for taxpayers.
The eurozone also needs to address the issue of who should make policy. Technocrats do not have a monopoly of wisdom; the conventional economic wisdom often turns out to be wrong. Some argue that Frankfurt Group policies won't solve the crisis but will instead trigger an austerity-driven debt spiral, much as they have done in Greece. Yet the only people in the eurozone with a meaningful say over the economic policies that will decide the fate of countries, families and individuals are German Germany. If the eurozone is to become a transfer union in which states become liable for each other's debts, its policy-making bodies will need democratic legitimacy.
The zone's problem is that a transfer union can only work if it develops governance structures that allow far greater fiscal control from the centre. Even if Member States were willing to accept such a loss of sovereignty—and Germany has consistently said it isn't—it is hard to see how they could unless eurozone policy-making was based on something more transparent and accountable than the Frankfurt Group. The original sin of the euro's founding fathers was that they tried to pursue monetary union without the necessary political union to sustain it. Turning the ECB into a lender of last resort without addressing the eurozone's governance crisis risks simply compounding that error.