Bank of England governor Mark Carney has warned the current structure of the eurozone puts it in an “odd position”.
Mr Carney said sharing a currency without also sharing decisions on taxes and spending did not work.
“For complete solutions to current and potential future problems the sharing of fiscal risks is required,” he told an audience in Dublin, Ireland.
Currently, EU members share the euro currency, but decisions on spending are made at a national level.
Mr Carney said “it is no coincidence” that effective currency unions tended to have centralised fiscal authorities.
“European monetary union will not be complete until it builds mechanisms to share fiscal sovereignty,” he said.
He said the current system in the eurozone made it stand out from federal countries like the US, Canada and Germany, where a central government has the ability to transfer significant financial resources to constituent states as-and-when those states run into severe difficulties.
“Without this risk sharing, the euro area finds itself in an odd position,” he added.
Source: BBC News