Lost at Sea: The Euro Needs a Euro Treasury
AbstractThe euro crisis remains unresolved even as financial markets may seem calm for now. The current euro regime is inherently flawed, and recent reforms have failed to turn this dysfunctional regime into a viable one. Our investigation is informed by the "cartalist" critique of traditional "optimum currency area" theory (Goodhart 1998). Various proposals to rescue the euro are assessed and found lacking. A "Euro Treasury" scheme operating on a strict rule and specifically designed not to be a transfer union is proposed here as a condition sine qua non for healing the euroâ€™s potentially fatal birth defects. The Euro Treasury proposed here is the missing element that will mend the current fiscal regime, which is unworkable without it. The proposed scheme would end the currently unfolding euro calamity by switching policy from a public thrift campaign that can only impoverish Europe to a public investment campaign designed to secure Europeâ€™s future. No mutualization of existing national public debts is involved. Instead, the Euro Treasury is established as a means to pool eurozone public investment spending and have it funded by proper eurozone treasury securities.
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Bibliographic InfoPaper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_780.
Date of creation: Nov 2013
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Euro Crisis; Currency Union; Fiscal Union; Transfer Union; Cartalism; Lender of Last Resort; European Integration;
Find related papers by JEL classification:
- E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- 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
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-12-15 (All new papers)
- NEP-EEC-2013-12-15 (European Economics)
- NEP-MAC-2013-12-15 (Macroeconomics)
- NEP-MON-2013-12-15 (Monetary Economics)
- NEP-PKE-2013-12-15 (Post Keynesian Economics)
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