Replacing the Stability and Growth Pact?

The euro-zone division between a single, federal monetary system and separate national fiscal systems is troublesome. The attempt to deal with it via the Stability and Growth Pact has not succeeded. Any hopes that the function of stabilizing asymmetric shocks might be shifted to the federal centre have been dashed by the referendums. I argue that the main concern over the event of a failure of a nation state in the euro-area to meet its debts is the contagious effect that that would currently have on its domestic financial intermediaries. So the proper response would be to enforce significant incremental capital requirements on financial institutions' holdings of such debt.