At the Crossroads: The Euro and Its Central Bank Guardian (and Savior?)
AbstractThis paper investigates the role of the European Central Bank (ECB) in the (mal-) functioning of Europe's Economic and Monetary Union (EMU), focusing on the German intellectual and historical traditions behind the euro policy regime and its central bank guardian. The analysis contrasts Keynes's chartalist conception of money and central banking to the peculiar post-WWII German traditions as nourished by the Bundesbank and based on fear of fiscal dominance. Keynes viewed the central bank as an instrument of the state, leading and controlling the financial system and wider economy but ultimately an integral part of, and controlled by, the state. By contrast, the "Maastricht (EMU) regime" (of German design) positions the central bank as controlling the state (and disciplining labor unions, too). The paper identifies a number of potential weaknesses that could undermine the euro's guardian of stability, and ultimately the euro itself. Essentially, the national success of the Bundesbank model in pre-EMU times has left Europe stuck with a policy regime that is wholly unsuitable for the area as a whole. As the general perception in Germany today is that the euro crisis has confirmed the soundness of the key "stability-oriented" principles and ideas behind the euro regime, and of the virtuousness of Germany's own conduct under that regime in particular, it is hard to see how Europe might escape doom through regime reform and policies that would need to permanently put to rest Bundesbank wisdom.
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Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_738.
Date of creation: Nov 2012
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Central Banking; Bundesbank; Ordoliberalism; Economic and Monetary Union; Euro Crisis;
Find related papers by JEL classification:
- B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Allsopp, Christopher & Vines, David, 1998. "The Assessment: Macroeconomic Policy after EMU," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 14(3), pages 1-23, Autumn.
- Jörg Bibow, 2001. "Making EMU Work: Some Lessons from the 1990s," Macroeconomics, EconWPA 0103008, EconWPA.
- Jorg Bibow, 2001. "Making EMU Work: Some Lessons from the 1990s," Economics Working Paper Archive, Levy Economics Institute wp_326, Levy Economics Institute.
- Jorg Bibow, 2001. "Making EMU Work: Some lessons from the 1990s," International Review of Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(3), pages 233-259.
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