Quote Originally Posted by Furunculus View Post
Because it isn't just what you spend your taxes on and how much, it is where you spend them in order to even out the imbalances that prevent one part of the economy from functioning within another.
Infrastructure - welsh road building
Social security - glasgow
Public jobs - north east
Procurement - harland and wharf
Failure to do so results in a divergent economy where the poorer parts struggle to live in a richer society, and poverty is compounded. Visit Greece today.

America knows this, it operates a transfer union, it succeeds. Can the same be said for the eurozone?

The reverse side of the fiscal union coin, a transfer union, and you can't dump public money on someone else unless theirnis a social compact permitting this.
This requires a political union, or put another way; a sense of shared familial sentiment.
Except that the EMU memer states have been functioning as financially independent nations for a long, long time before they introduced the Euro. All the troubled EMU countries are larger in population than the average American state, nevermind Glasgow or Wales. I remain unconvinced that being part of EMU, in itself, has made it absolutely impossible for them to ever be able to foot their own bills- which seems to be the core of your argument.

A pretty big part of the problem is that some southern countries, Greece in particular, have seen large increases in wages over the past decades while Germany and several other northern countries have deliberately limited wage increases to safeguard their competitive edge. Obviously not being able to devaluate the currency stops souther countries from devaluating their wages, but that just means they lack a solution for a problem that needn't have existed in the first place.
It's worth noting that in Germany there have been several large wage increases the past few months; which might be the first step to solve this kind of problems in the longer term.

in part because a common currency comes with a homogenised borrowing rate.
Not necessarily; allthough it's obvious that in this case it did happen: being in the EMU has allowed "weaker" countries to borrow at excellent interest rates for a long time. In the case of Spain, whose government finances were pretty solid actually, it contributed to the housing bubble. However a lot of anti-EMU activists extend this argument to blame the Euro for the fact that the Greek government borrowed a buttload of cash and ran -5% deficits even in the "good years". Which is incredibly stupid.