History points to fiscal solution to euro crisis

LONDON (Reuters) - It's a lesson that Germany might not want to hear, but history suggests that greater centralization of tax and spending powers is the outcome when monetary unions run into crises like the one now sorely testing the euro zone.

In a study of the political and fiscal record of five federal states, economic historian Michael Bordo concludes that such a policy response is already unfolding in the European Union, as illustrated by the creation of a euro area financial rescue fund.

"History suggests that the creation of a union-wide bond market with a common bond may prove to be a successful way to finance increases in public expenditure to prevent the malaise experienced today in Europe," Bordo wrote in a paper co-authored with Agnieszka Markiewicz and Lars Jonung....