Because Ms. Merkel agreed to breach this rule, Germany’s taxpayers feared that they were on the hook for Southern Europe’s debts. Ms. Merkel therefore demanded greater control over other countries’ budgetary decisions — and the European Commission was only too delighted to grab new powers. Countries that share a currency and an interest rate need greater fiscal flexibility, not less, but the commission now applies a fiscal straitjacket — including the right to demand that a government rewrite its budget before presenting it to parliament.

This centralization of fiscal powers is not just economically dangerous; it is also politically poisonous. When voters in a member country have turfed out their government, as they have done at almost every election since the crisis, Olli Rehn, the commission’s vice president and fiscal enforcer (currently on temporary leave), has popped up on television to insist that the incoming government stick to the old one’s failed policies. That a remote, unelected and scarcely accountable official in Brussels should deny voters legitimate choices about tax and spending decisions is undemocratic and alienates people from the European Union.

A crisis that could have united Europe in a joint effort to curb the mighty banks has instead divided the euro zone into creditor nations and debtor ones, with banks’ bad loans becoming intergovernmental obligations. European Union institutions have become instruments for creditors to impose their will on debtors, subordinating Europe’s southern “periphery” to the northern “core” in a quasi-colonial relationship. Berlin and Brussels now have a vested interest to entrench this system rather than cede power and admit to mistakes.

To get out of this mess, the euro zone needs a change of policies and institutions. Banks need to be restructured and unbearable debts written down. More investment is needed, along with bold reforms to boost productivity.

The “no bailout” rule should also be restored. Elected national governments must have much greater flexibility to tax and spend as they please, constrained by markets’ willingness to lend to them and ultimately by the possibility of default. A mechanism for the orderly restructuring of sovereign debt should be established for that purpose.

To avoid future panics, the European Central Bank’s role as a lender of last resort to solvent governments should be enshrined. The mechanism for restructuring failed banks also needs to be properly independent.

In the long term, a euro zone treasury accountable to both European and national legislators should be created, with limited tax-raising and borrowing powers. To persist with current policies and institutions will corrode support for the European Union and risks destroying it. We need a European Spring of economic and political renewal.

Philippe Legrain, a former economic adviser to the European Commission president, is the author of “European Spring: Why Our Economies and Politics are in a Mess — and How to Put Them Right.”