NOTE: This Working Paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB. Acknowledgements This article was prepared for a special issue of the Journal of Common Market Studies entitled: “Symposium on Economic and Monetary Union and the Crisis of the Euro Area ” to be published in volume 50, number 6. We would like to thank Philippe Moutot, Amy Verdun, Nicola Doyle and two anonymous referees for helpful comments and suggestions. Thanks are also due to Piet Philip Christiansen for research assistance and to Giovanna de Salvo and Silvia Geise for editorial assistance. We remain responsible for any errors or omissions. The views expressed are our own and do not necessarily reflect those of the ECB. The article reflects data and developments up to mid 2012.