The sovereign debt crisis revealed structural weaknesses in the architecture of Europe’s Economic and Monetary Union (EMU), with significant implications for the single monetary policy. This has led to institutional developments and debates in four key areas of EMU: banking union, fiscal union, economic union and political union. Monetary policy transmission can become ineffective owing to fragmentation along national lines in times of financial stress. Establishing the banking union has been a major step towards a monetary policy transmission mechanism that functions more smoothly. Nevertheless, is the banking union fit for purpose or are there still risks of fragmentation in EMU? The notion of monetary and fiscal policy mix is challenging in a monetary union with 19 fiscal authorities. Europe’s fiscal framework has not prevented pro-cyclical fiscal policies, meaning that monetary policy has been overburdened. Is there a need for new instruments, such as a central budget, to ensure a smoother functioning of EMU? Is the current fiscal framework sufficient to ensure an appropriate policy mix in EMU? In the run-up to monetary union it was argued that monetary integration would spur economic convergence. 20 years on one of the features of EMU remains significant cross-country heterogeneity. Setting monetary policy for EMU as a whole is challenging when there are differences between the economic policy frameworks of member countries, for example in their wage and price-setting behaviours. What are the causes of lasting economic divergences in EMU and how should they be addressed? Finally, the resurgence of nationalistic sentiment combined with populist tendencies brings about political challenges to European integration and to the single monetary policy. This raises the question of how to strengthen democratic accountability in a monetary union consisting of sovereign states.