As economic stagnation continues to mark the EU in the fifth year of the euro zone crisis, political support for integration is waning. The European Parliament elections of 2014 returned a hitherto unparalleled number of Eurosceptic MEPs, with EU-critical parties becoming the largest ones in several Member States. Much of this Euroscepticism is driven by economic polarisation between core and peripheral countries. While an increasing number of voters in the northwestern creditor countries resent having to foot the bill for what they consider economic mismanagement in the periphery, voters in peripheral countries increasingly rebel against what they deem to be an economically catastrophic Diktat from Germany and its allies. Continued political support for European integration will hinge on successful income convergence in the EU but the current dilemma is that such policies might not be politically feasible. Periods of rapid convergence would seem to suggest that success depends on two main policy strategies. First, a monetary policy that promotes credit for productive purposes, leaves inflation control to other instruments, and employs selective credit rationing to prevent asset booms. Second, a vertical industrial policy prioritising selected industrial sectors. The first policy conflicts with the present framework of euro zone monetary policy, but that framework was only installed in the first place because many peripheral countries were desperately in search of an external constraint on domestic distributional conflict. Industrial policies, in turn, require a sufficient degree of state autonomy from business elites in order to be effective, but it is highly questionable whether most states in the EU possess such autonomy. Though there are, as yet hesitant, signs of a reorientation of both monetary and cohesion policy in the EU, the question of the institutional and political preconditions for their successful implementation has been largely neglected.
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