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This paper follows an institutional approach to the Euro Zone (EZ) crisis. So, prevailing explanations are criticized, and arguments for rejecting the officials’ belief in expansionary austerity are offered. The origins and implications of the most dangerous component of the crisis — the structural imbalance between core and periphery — are explained. But, instead of endorsing the view of the crisis as a localized problem that can be contained in the EZ periphery, the paper shows the systemic character of the crisis by exposing the negative externalities and the coordination failures which affect the entire EZ. Two strategies for solving those malfunctions are designed and the paper ends by offering “first best” and “second best” solutions to the EZ Crisis.