If there was one lesson to be learned from the European sovereign debt crisis, it was that monetary union by itself cannot work indefinitely. If Europe really wants to preserve the advantages of the euro currency, it will need far more fiscal and economic integration. Nations will have to give up a significant amount of sovereignty.

European leaders seem to be willing to accept that reality. But persuading publics may be far more difficult.

After more than a year of claiming that Greece could be bailed out without significant costs either for lenders or the rest of Europe, European leaders pledged on Thursday to pump in large amounts of money to try to revive the Greek economy while delaying repayment and reducing interest rates on existing loans.

It appears that the deal will mean solvent European nations will have to write some very large checks. Lenders will suffer losses, and some banks may need more bailouts, which Europe will pay for through a collective fund that will be authorized to borrow money backed by European states individually and collectively.

That fund, called the European Financial Stability Facility, will also take over lending to Greece, at rates close to what the facility is forced to pay when it borrows money.

Other parts of the communiqué issued by the European leaders after their summit meeting in Brussels promise there will be more central control over national budgets and tax policies.

Call it the federalization of Europe.

David Fuller's view My recollection is that many financial commentators recognised over a decade ago, before the euro's launch, that monetary union alone would not work. Monetary union was expedient at the time but the euro project was always likely to stumble during the first significant recession. It has and Europe is now embarking on the gradual and lengthy process of fiscal and economic integration. This would not have been politically possible from the beginning.