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What Does the 1930s’ Experience Tell Us about the Future of the Eurozone?

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  • Crafts, Nicholas

    (University of Warwick)

Abstract

If the Eurozone follows the precedent of the 1930s, it will not survive. The attractions of escaping from the gold standard then were massive and they point to a strategy of devalue and default for today’s crisis countries. A fully-federal Europe with a banking union and a fiscal union is the best solution to this problem but is politically infeasible. However, it may be possible to underpin the Euro by a ‘Bretton-Woods compromise’ that accepts a retreat from some aspects of deep economic integration since exit entails new risks of financial crisis that were not present eighty years ago.

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Bibliographic Info

Paper provided by Competitive Advantage in the Global Economy (CAGE) in its series CAGE Online Working Paper Series with number 142.

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Date of creation: 2013
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Handle: RePEc:cge:wacage:142

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Keywords: economic disintegration; Eurozone; financial repression; gold standard; macroeconomic trilemma; political trilemma;

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