The Eurozone crisis has demonstrated clearly that the fiscal situation in one member of a shared currency area is no longer exclusively a domestic affair given their monetary union. Failure to acknowledge that monetary union alone cannot bind a common currency (or, perhaps, choosing to ignore this fact), has brought us to the present point.

It seems it was always going to be this way. And Nobel Prize winner Milton Friedman’s prescient warnings about the inadequate design of the Eurozone are now being cited widely by analysts and commentators. Thus there is a rush on to address these inadequacies with competing proposals about what route to take.

In fact it might be more plausible to say that there is only one route and the question is how far to go down it, now. National fiscal discipline, common oversight and surveillance, fiscal or political union.

There is a difference between fiscal union and fiscal discipline, as the Taoiseach has stated. But, there is also a difference between fiscal discipline that is self-imposed and fiscal discipline imposed by others.

It is fair to say that the last, realistic proposal to deal with the current crisis will come from Council President, Herman Van Rompuy later next week. We don’t yet know what this will involve but we can draw conclusions as to some minimum requirements.

A part of his proposal will surely be the introduction of debt brakes in national budgets in the Eurozone. The Taoiseach has already signaled that the government will legislate for such a measure here in the New Year. This is nothing to fear; in fact it is a welcome move to greater fiscal discipline and responsibility on the government’s part. Yet if it is matched with the threat of sanctions ‘from above’ this does present a problem.

I can’t foresee how any such sanctions would work in practice, be they financial or political. Financial measures, say withholding of structural funding, might further exacerbate the wayward behavior the sanctions were intended to correct. It is also difficult to imagine what political sanctions could entail or whether or not they would be practicable. Suspension of voting rights has been mooted, but voting over what? Any area where a vote impacted upon a member’s sovereignty would be a non-starter.

Separate from that is the principle. Self-discipline isn’t self-discipline when its observance depends on a threat from another. And what of the likelihood that future governments might absolve responsibility for certain decisions to the European Council or ECOFIN because it suited them not to take the blame.

Another key part will be oversight of national budgets at an EU wide level. There is no problem with other European parliaments or leaders reviewing, even commenting upon that which is already public in a fellow member state. It happens all the time. But the possibility of other European parliamentarians (accidentally or not) being shown budgetary proposals not yet seen by the Irish parliament must not be allowed to happen again.

In fact, the current government is working towards restoring our fiscal independence so that bodies such as the IMF, ECB and the Commission would no longer be in a position to demand a review of budgetary proposals before these were decided by Dail Eireann. This ambition must maintain through the Eurozone crisis.

Reforms to the national budgetary process will likely continue under Minister Noonan, meaning greater involvement of TDs in monitoring the present annual fiscal cycle and preparing for the next. Should another country’s parliament choose to review these discussions that were available on public record there would be no problem with that. What would not be acceptable is a more intrusive type of oversight where external elements would be able to intervene directly in the debate (and possibly decisions taken) as proposed by the Commission.

This leaves us then searching for proposals that go far enough, but not too far. What is required is a commitment to fiscal discipline strong enough that allows the European Central Bank to act as a true central bank for the common currency area.

To a large extent, arguments against such a role based on legal interpretations of the bank’s mandate are on shaky ground. Recent statements from the ECB head, Mario Draghi suggest that the bank is beginning to accept this.

If we look to the history of the central bank in the UK, we see that the Bank of England was never mandated as the central bank we now know, nor did its charter give it legal authority to become the lender-of-last-resort, but it assumed that role in the 1825-1826 crisis as a matter of need. That need arises now in the Eurozone. It is not the solution but it could be a temporary relief. ‘Temporary’ is an important concession here.

One expert recently put it thus: “The ECB can only be used as a bridge that allows governments to advance along the road to fiscal responsibility. However, that bridge is crucially important right now because governments have come to the edge of the cliff and cannot reach the other side without assistance.”

What point a European Central Bank without a Eurozone? The ECB must become that temporary bridge and so we have to assume that it will. Because if it doesn’t then this whole debate becomes meaningless; there will be no more euro.

What this will take remains to be seen but Draghi recently referred to a “new fiscal compact – a fundamental restatement of the fiscal rules together with the mutual fiscal commitments that euro area governments have made”.

We will know the details of the likely compact soon. And while whatever Van Rompuy proposes may well be enough in terms of meeting the ECB’s requirements, he may also attempt to take us too far, too quickly.