This paper discusses the impact of the sovereign debt crisis on the functioning of national democracies in the EU and its main drivers. After critically reviewing some common explanations proposed to make sense of the transformations undergone by European democracies since the onset of the crisis, it argues that decades of economic integration and lately monetary union have created a transnational policy space in Europe. This is characterized by mutual interdependence where decisions made by national democratic authorities potentially or actually affect the life of people outside the boundaries of their democracies. The analysis shows that the absence of fully empowered transnational democratic institutions and the decision to manage economic interdependence under an intergovernmental framework are largely responsible for stifling national democracies in the EU. It concludes that EU leaders have a choice between taking up the challenge of transnational democracy, breaking up the Euro to decrease economic interdependence and preserve national democratic institutions or steering their societies towards a post- democratic future.