Economic and monetary union, long dogged by failure to complete its initial architecture and design, faces both shorter- and longer-term problems. Among measures to help resolve issues in the first category, the European Central Bank on 3 December extended its asset purchase programme by six months until end-March 2017, taking total asset purchases to €1.5tn and broadening asset eligibility to include local and regional debt.

Inflation has been persistently below the ECB’s 2% objective since January 2013, below 1% for almost two years, and below 0.5% for 16 consecutive months. Inflation isn’t the European Union’s only concern; there are many more, including Europe’s anaemic growth record, its 22m unemployed and the escalating refugee crisis.

The euro area’s macroeconomic framework contains the following elements: internal devaluation in some distressed peripheral countries (cuts in real wages with little productivity gains); fiscal devaluation in other countries (shifts in taxes away from labour towards indirect taxes); and fiscal consolidation accompanied by private debt deleveraging. Unsurprisingly, the result is poor growth and low nominal demand.

The ECB’s QE makes sense: inflation is always a monetary phenomenon, so combating low inflation requires monetary policy. However, euro area nominal demand has been persistently weak. Nominal GDP has cumulatively increased by 7.7% over the past seven years, compared with 27% in the seven pre-crisis years 2002-08. So one would tend to ask whether low inflation is a symptom or a cause of weak euro area demand. The question is whether QE is enough on its own to avert the negative spiral of low inflation, or whether we need other macroeconomic policies to boost aggregate demand.

Take, for instance, the excessive macroeconomic imbalance procedures, established to improve national policy coordination. Few would disagree that these procedures have so far been a failure, proving ineffective, for example, in addressing excessive current account surpluses in the euro area – 8% of GDP last year in Germany.

The EU has put forward various measures to promote more harmonised policies, including technical assistance to help members implement administrative and structural reforms, national competitiveness boards, and a European deposit guarantee scheme. These are all welcome ideas and proposals, some of which have yet to be implemented and tested in practice.

On the standard question of whether there should be a wider or deeper Europe, we have witnessed new thinking. Last year’s ‘Five presidents’ report’ set out an ambitious agenda, laying the foundations and setting out a timeline for a banking union, as well as steps towards fiscal union and a capital markets union.  This reflects a welcome shift towards more burden-sharing. The question remains how quickly Europe will complete EMU and move towards a common deposit guarantee scheme or some form of sovereign debt mutualisation. Or indeed put in place the initiative of Jonathan Hill, the EU Commissioner responsible for financial services, for a capital markets union to improve the financing of the EU economy. Personally, I would like to see the European Stability Mechanism, the bail-out fund set up at the height of the crisis to rescue indebted peripheral nations, mutate into a truly European Monetary Fund in charge, among other things, of future debt restructuring in euro members.

Most of Europe’s tribulations can be attributed to its failure to resolve crises through mutual agreement and collective action, violating the EU’s fundamental values of co-operation and solidarity. We see the demands of avoiding moral hazard and strengthening national responsibility competing against the need for European solidarity and risk-sharing. Europe has to achieve the right balance between these principles. This will be the ultimate test for the effectiveness of institutional design improvements and the overall goal of better economic governance.

Jobs, growth and social cohesion are what matters to the average European. The dramatic rise in unemployment and lack of job creation, drastic cuts in living standards and persistent recession have led to rising Euroscepticism, and unleashed the dark forces of neofascism in some member states. There is a real risk of a two-speed Europe across all policy fields. As the day approaches for the British referendum on EU membership, a discussion on where Europe is heading becomes ever more necessary, not just for the UK but for the rest of Europe.

Prof. John (Iannis) Mourmouras is Senior Deputy Governor, Bank of Greece and a former deputy Greek finance minister.