We find the litmus test is whether governments gain access to a safe source of funding in a ‘domestic’ currency. Of the list of solutions considered, both Purple bonds and E-bonds can meet this criterion.

In its present set-up, the EMU could be expected to follow its historical predecessor, the Latin Monetary Union, which was founded in 1865 and in effect ended in 1914. Then as now, it was impossible to coerce sovereign states to follow the rules needed to establish a single currency.

The lesson from previous episodes of trade reform is in part a story of political framing as well as a story of compensatory deals. Countries can calculate that they might lose out on the solution to one of the issues but gain on another.