The Risk of Incomplete Financial Integration in the European Union

The integration of financial markets is crucial in a monetary unification process, taking into account the ability to foster risk sharing and optimal allocation of savings and investments within the integrated space. After the creation of the single European currency in 1999, the sovereign debt crisis in the Eurozone questioned the model of monetary integration and its architecture because of its disparate impacts on member states, which called into question the viability of the Euro. In this chapter we evaluate the evolution of financial integration in the Eurozone and discuss the causes and effects of the crisis in the process of financial fragmentation. We conclude with identification of the aspects that we consider crucial to reform the paradigm of governance of the single currency