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Monetary Union, Fiscal Crisis and the Preemption of Democracy

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  • Fritz W. Scharpf
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    Abstract

    The European Monetary Union (EMU) has removed crucial instruments of macroeconomic management from the control of democratically accountable governments. Worse yet, it has been the systemic cause of destabilizing macroeconomic imbalances that member states found difficult or impossible to counteract with their remaining policy instruments. And even though the international financial crisis had its origins outside Europe, the Monetary Union has greatly increased the vulnerability of some member states to its repercussions. Its effects have undermined the economic and fiscal viability of some EMU member states, and they have frustrated political demands and expectations to an extent that may yet transform the economic crisis into a crisis of democratic legitimacy. Moreover, present efforts of EMU governments to rescue the Euro will do little to correct economic imbalances and vulnerabilities, but are likely to deepen economic problems and political alienation in both, the rescued and the rescuing polities.

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    Bibliographic Info

    Paper provided by London School of Economics / European Institute in its series Europe in Question Discussion Paper Series of the London School of Economics (LEQs) with number 6.

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    Date of creation: 25 May 2011
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    Handle: RePEc:erp:leqsxx:p0036

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    Web page: http://www2.lse.ac.uk/europeanInstitute

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    1. Lars Jonung & Eoin Drea, 2010. "It Can't Happen, It's a Bad Idea, It Won't Last: U.S. Economists on the EMU and the Euro, 1989-2002," Econ Journal Watch, Econ Journal Watch, vol. 7(1), pages 4-52, January.
    2. Barry Eichengreen, 2007. "The Breakup of the Euro Area," NBER Working Papers 13393, National Bureau of Economic Research, Inc.
    3. Barry Eichengreen & Jeffry Frieden, 1993. "The Political Economy Of European Monetary Unification: An Analytical Introduction," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 85-104, 07.
    4. von Hayek, Friedrich August, 1974. "The Pretence of Knowledge," Nobel Prize in Economics documents 1974-2, Nobel Prize Committee.
    5. Thomas D. Willett & Orawan Permpoon & Clas Wihlborg, 2010. "Endogenous OCA Analysis and the Early Euro Experience," The World Economy, Wiley Blackwell, vol. 33(7), pages 851-872, 07.
    6. George Selgin, 2010. "The Secret of the Euro's Success," Econ Journal Watch, Econ Journal Watch, vol. 7(1), pages 78-81, January.
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