The institutions for a strong currency union in Europe are still lacking. To be effective, the EMU needs fiscal cooperation (or union), supranational bank regulation, and a central bank as lender of last resort to banks and sovereigns, Swedbank Economic Resaerch Department said Monday.

Euro zone politicians may opt for the less solid “transfer union” approach, using rescue funds instead, but then these funds need to be larger and more flexible.

The EMU is threatened by “democracy gaps”, which politicians need to address, not least of which how to meet the challenges for young generations.