The euro area is under pressure once again as the coronavirus outbreak shakes up countries in the bloc and brings historic differences to the fore.
The euro zone, in which 19 countries share the same currency, has struggled to grow since the sovereign debt crisis of 2011. At the time, highly-indebted nations, such as Spain, Portugal and Greece could not get financing from financial markets and asked for external help to support their economies.
Their financial difficulties raised concerns for the bloc's future: analysts warned it was ill-equipped to deal with financial shocks and may not survive. Almost a decade later, the same debate is back on the table, with the euro area struggling to come together to combat the coronavirus crisis.
"We could see a euro breakup," Karel Lannoo, chief executive officer at the Brussels-based think tank CEPS, told CNBC Wednesday on the phone, adding that the costs of this would be "enormous."
The World Health Organization (WHO) said earlier this month that Europe had become the new epicentre of the virus, experiencing new cases at a higher rate than anywhere else in the world. Countries such as Italy, France, Spain and Belgium are in lockdown in an effort to prevent the virus spreading further, which is dramatically hurting their economies.
The euro area has so far failed to deliver a massive fiscal stimulus package like that of the United States. Earlier this month, President Donald Trump signed a $8.3 billion emergency spending bill to deal with the coronavirus and on Tuesday, CNBC learned that the White House was considering a fiscal package of more than $1 trillion.
However, euro countries have individually announced fiscal stimulus programs. For instance, Italy has promised a 25-billion-euro ($27.26 billion) rescue plan and France said it will deploy 45 billion euros to mitigate the impact of coronavirus on businesses, among other measures.
Lannoo told CNBC the euro zone needs a common fiscal policy — this would make their response in times of crisis much quicker. "Let's use this opportunity to come up with EU-wide fiscal policies," he said.
Giovanni Di Lieto, professor at Monash University in Australia, said in an email that the euro zone was "in great jeopardy" given the looming economic slowdown and how that could feed the rhetoric of anti-EU politicians.
Speaking to CNBC's Geoff Cutmore on Wednesday, Mario Centeno, who as president of the Eurogroup coordinates the works of the 19 euro zone finance ministers, admitted that the coronavirus crisis requires "quick" and "coordinated" action from the euro zone.
"This is not 2008," he said, referring to the global finance crisis, adding the coronavirus impact was of "different nature."
The 19 euro zone countries follow the same monetary policy rules, established by the European Central Bank (ECB). However, their fiscal policies are still decided at the national level. This means there is a sharp difference between countries in terms of public debt and government deficits.
As a result, countries that are fiscally more conservative are often reluctant to share fiscal policy with other nations, who tend to spend above their limits.
European leaders debated briefly on Tuesday the possibility of issuing euro bonds to provide financial help during the coronavirus crisis. Euro bonds are a highly sensitive issue because they would technically group debt from, for example, Italy and Germany, in one bond. Countries that are more fiscally sound do not want to have their debts associated with those of highly-indebted nations.
"If not now, then when?" Frederik Ducrozet, senior economist at Pictet Wealth Management, tweeted on Wednesday, referring to when euro zone leaders would develop their fiscal policies.
Centeno did not want to comment on the debate over euro bonds but said there would be "new" instruments to address the coronavirus' impact.
"We have a mandate for finance ministers, together with the European Commission, ECB and ESM (European Stability Mechanism) to work on new weapons to deal with this crisis which has many dimensions," he said.
He added that all European institutions are "focused in fighting this crisis and getting over the difficulties we have today."
However, financial markets in the region are still showing signs of distress. Italian borrowing costs have risen over the last few days after the ECB President, Christine Lagarde, failed to reassure investors that the bank would take all the necessary measures to support the region.
The yield on the 10-year Italian government bond was trading higher on Wednesday at 2.616%.