The Euro-project at risk
AbstractIn contrast to Robert Mundell's Optimum Currency Area theory and his recommendation of forming a monetary union, the economic fundamentals of Euro area member countries have not harmonized. The opposite holds: the Euro core countries - most of all Germany, but also the Netherlands and Finland - increased productivity growth while limiting nominal wage growth. However, Mediterranean countries - particularly Greece, but also Spain, Portugal, and Italy - have dramatically lost international competitiveness. Although the overall balance of payments for the Euro area at large is almost balanced, internal disequilibria are skyrocketing and default risk premiums and tensions within the Euro area are rising, thus jeopardizing the stability of the monetary union. The findings confirm that a common currency without fiscal union is inherently unstable. The international financial and economic crisis has merely triggered events which highlight this instability. The paper discusses three possible scenarios for the future of the Euro: a laissez faire approach, a bailout, and finally an exit strategy for the Mediterranean countries, or an organized exit by a group of core countries led by Germany, forming their own smaller monetary union. --
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by ZEI - Center for European Integration Studies, University of Bonn in its series ZEI Working Papers with number B 04-2010.
Date of creation: 2010
Date of revision:
Optimum currency areas; monetary union; risk spreads; central banking; exchange rates; fiscal policy;
Other versions of this item:
- Hauskrecht, Andreas & Stuart, Bryan & Hankel, Wilhelm, 2010. "The Euro-Project at Risk," MPRA Paper 23750, University Library of Munich, Germany.
- Wilhem Hankel & Andreas Hauskrecht & Bryan Stuart, 2010. "The Euro-Project at Risk," Working Papers, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy 2010-05, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- F15 - International Economics - - Trade - - - Economic Integration
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
- NEP-CBA-2011-07-13 (Central Banking)
- NEP-MAC-2011-07-13 (Macroeconomics)
- NEP-MON-2011-07-13 (Monetary Economics)
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.:
- James M. Poterba, 1996.
"Budget Institutions and Fiscal Policy in the U.S. States,"
NBER Working Papers
5449, National Bureau of Economic Research, Inc.
- Poterba, James M, 1996. "Budget Institutions and Fiscal Policy in the U.S. States," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 395-400, May.
- Frankel, Jeffrey & Rose, Andrew K., 2001.
"An Estimate of the Effect of Common Currencies on Trade and Income,"
Working Paper Series, Harvard University, John F. Kennedy School of Government
rwp01-013, Harvard University, John F. Kennedy School of Government.
- Jeffrey Frankel & Andrew Rose, 2002. "An Estimate Of The Effect Of Common Currencies On Trade And Income," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(2), pages 437-466, May.
- Michele Fratianni & Andreas Hauskrecht, 1998. "From the Gold Standard to a Bipolar Monetary System," Open Economies Review, Springer, Springer, vol. 9(1), pages 609-636, January.
- Corsetti, Giancarlo & Roubini, Nouriel, 1996. "European versus American Perspectives on Balanced-Budget Rules," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 408-13, May.
- Eichengreen, Barry & von Hagen, Jürgen, 1995.
"Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
1247, C.E.P.R. Discussion Papers.
- Barry Eichengreen and Jurgen von Hagen., 1995. "Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C95-056, University of California at Berkeley.
- Strauch, Rolf R. & von Hagen, Jürgen, 2001. "Formal fiscal restraints and budget processes as solutions to a deficit and spending bias in public finances: US experience and possible lessons for EMU," ZEI Working Papers B 14-2001, ZEI - Center for European Integration Studies, University of Bonn.
- von Hagen,Juergen, .
"A note on the empirical effectiveness of formal fiscal restraints,"
Discussion Paper Serie B, University of Bonn, Germany
155, University of Bonn, Germany.
- von Hagen, Jurgen, 1991. "A note on the empirical effectiveness of formal fiscal restraints," Journal of Public Economics, Elsevier, Elsevier, vol. 44(2), pages 199-210, March.
- Schmitz, Birgit & von Hagen, Jürgen, 2009. "Current Account Imbalances and Financial Integration in the Euro Area," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7262, C.E.P.R. Discussion Papers.
- Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Kamil Galuscak & Tomas Holub & Eva Hromadkova & Narcisa Liliana Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Ivana Kubicova & Ji, 2012. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2012," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, Czech National Bank, Research Department, number as12 edited by Romana Zamazalova & Jakub Mateju, August.
- Michele Fratianni, 2012. "The Future International Monetary System: Dominant Currencies or Supranational Money? An Introduction," Open Economies Review, Springer, Springer, vol. 23(1), pages 1-12, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).
If references are entirely missing, you can add them using this form.