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This article considers whether the creation of a budgetary union in the European EMU (economic and monetary union) is a feasible and suitable way to resolve the current impasse created by the euro crisis. The article begins by identifying the major drawbacks concerning the transposition of prescriptions regarding fiscal federalism to the current E(M)U scenario, with the outlook that this appears to be an extemporaneous solution. It then indicates the alternative conception of an incomplete budgetary union, which is mostly characterized by the setting up of specific insurance mechanisms. These alternative measures are shown to be more realistic and feasible, since they combine path dependency with an innovative appropriation of specific features of the classic federalism model, modifying them to an E(M)U scenario in a heterodox way.

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The author identifies the two main (external and internal) dimensions of incomplete sovereignty in the EMU and the respective caveats affecting the scope of the single monetary policy, here described as a ‘monetary policy integration trap’. The author details the main implications caused by this curtailed sovereignty both in its external and internal dimensions – e.g. on the one hand, the polarisation of external positions and, on the other hand, the effects of limited European fiscal/budgetary sovereignty and the atypical interaction between the latter and the single monetary policy. Finally, the way the E(M)U has in recent years addressed this integration trap is analysed, making use of a heterodox method here labelled as the ‘State-mimicking’ method. The main conclusion is that such a method is the possible yet imperfect policy solution to bypass the monetary policy integration trap, given the E(M)U’s ontological ambiguities - a quasi-State afraid to become one.