Last week, in a highly anticipated speech,German President Joachim Gauck cautioned against the blind pursuit of an“ever-closer” European Union, acknowledging that the growing inequality amongmember states is generating “a sense of unease, even unmistakable anger,” andincreasing the risk of national humiliation. He pointed out that, in additionto the economic crisis, there is “a crisis of confidence in Europe as apolitical project.”

While Gauck made clear that he remains decidedly pro-Europe, hehighlighted the need for closer reflection about Europe’s future – andespecially that of the eurozone. Standing on the verge of greater integration,Europeans are hesitant, “unsure whether we should really stride out on the onwardjourney.” Addressing this hesitation, he declared, will require a thoughtful,nuanced understanding of what “more Europe” actually means.

Gauck may not have gone far enough: At this point, an ever-closer unionmay be a political mirage.Any meaningful progress toward stabilizing the eurozone would require asignificant – potentially open-ended – financial commitment, and the EU is notpolitically ready to cross that threshold. Repeatedly pretending to moveforward, then pulling back at the critical point, exacerbates politicaluncertainty and economic vulnerability.

Rather than indecisivelypursuing more unity, this may be the moment to restore effective sovereignty tonational authorities in eurozone countries. Such a move would alleviate anxietyin the short term, thereby giving Europeans the opportunity to regroup in preparationfor future steps toward a more integrated Europe and a more resilient euro.

To this end, eurozone leaders must take three key steps. The dysfunctionalsystem of European fiscal governance should be dismantled; fiscalresponsibility should be returned to member states; and, to minimize the riskof excessive future lending, private lenders should be required to bear thelosses implied by unsustainable sovereign debt.

The case against European fiscal governance is straightforward. Before thecrisis, the single-minded emphasis on reducing national budget deficits to lessthan 3% of GDP led to extensive abuse. Either the target was openly flouted, as it was inleading economies like Germany and France, or the data were manipulated to obscure problems (acommon practice throughout the eurozone, not just in Greece). And the belief ineconomic growth as a fiscal panacealed to unrealistically optimistic GDP forecasts.

When the crisis struck, the 3% deficit target became the focal point forunrelenting austerity – a form of what anthropologist Clifford Geertz describedas “involution,”which occurs when a process intensifies rather than changes in response toexternal or internal pressure. In other words, EU leaders began to complicatefiscal governance, ultimately creating an inefficient, inescapable labyrinth of regulationand bureaucracy. As fiscal metricsbecome increasingly intricate,monitoring efforts will become ever easier to undermine.

The case for returning fiscal responsibility to national authorities isalso strong – and not only because centralized fiscal authority has proved tobe so inefficient. With citizens of distressed countries bearing the fiscalburden of the crisis, the enduring presumption that they will not actresponsibly is patronizing,at best. And the current strategy of exchanging goodies for good behaviorencourages game-playing and dilutesresponsibility. While the risk that governments will succumb to fiscal temptation remains,citizens’ current suffering is likely to deter future excesses.

National fiscal sovereignty would facilitate the final crucial step: buildinga more mature relationship with private lenders. The eurozone was founded onthe “no bailout” principle: if member states could not repay their debts,lenders would bear the losses. But lenders chose – correctly, as it turned out– to disregard that threat. Instead of enforcing the no-bailout principle andestablishing a precedent, debtor countries used official loans to repay privatecreditors.

As a result, these countries have condemned themselves to continuedausterity, low growth, and high debt, while diminishing any future incentivefor private lenders to impose fiscal discipline on sovereign borrowers. Only byshifting the burden of responsibility back onto private lenders can debtorcountries escape this quagmire.

In the United States, each state is responsible for its fiscal management,without being forced to comply with a single, overarching template. The statesare not regulated by the federal government; they are disciplined by theknowledge that no one will repay their debts for them. And the system seems towork: entering the crisis, US states had significantly lower deficit and debtratios than the eurozone’s vulnerable member states.

So far, European integration has largely been a process of “fallingforward,” with each stumbleserving as a lesson from which a stronger union emerges. But, while thisuncertain approach may sufficeas a basis for declarations of good intentions, it does not inspire theconfidence required for countries to make the profound financial commitmentthat is now needed.

Europeans should have the chance to regain their footing. Transferringfiscal responsibility back to national authorities would not only mean the endof counterproductive efforts to manage fiscal affairs centrally; it would alsodiminish the sense of frustration and lack of control that is fuelingEuro-skepticism.

In short, taking a step back would provide an opportunity to reset, toreflect, and to plot the best course toward a more stable, more integratedEurope. For a fiscal union to function – however unlikely that outcome may be –a solid foundation is crucial. As Gauck explained, Europeans “are pausing to…equip [themselves] both intellectually and emotionally for the next step, whichwill require [them] to enter unchartedterritory.”

Giving Europeans the time and space to choose more Europe would reinforcethe core values upon which integration has rested for more than six decades.Continuing to stumbleforward, however, would inevitably lead to a debilitating, if not fatal,fall.