The prolonged recession in the Eurozone is mainly due to austerity policies, which are based on faulty theoretical foundations no less than on faulty narratives and empirical analyses of the crisis. The twin mantras of structural reforms and internal devaluation are also based on twisted arguments. The social costs of the crisis and the permanent risks of Euro-dissolution suggest that it is urgent having a new “Ecofin 2.0”, with a clear mandate for fiscal policy coordination vis-à-vis the monetary policy stance of the ECB, even in the absence of a full-blown European federal system. We attempt at listing the main features of the suggested institutional reform.

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