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Current Imbalances and Main Adjustment Mechanisms in the European Monetary Union

Author

Listed:
  • Gheorghe Matei

    (University of Craiova Faculty of Economics and Business Administration)

  • Luiza Apostol

    (University of Pitesti)

Abstract

The adoption of the euro as a common currency in 17 of the 27 member states of the European Union was achieved in a process that did not strictly observe the recommendations of the economic theory of an optimal monetary area. The elimination of exchange rates before the establishment of European Monetary Union represented the renunciation of an automatic macroeconomic stabilization mechanism and generated major commercial and financial imbalances between the countries in the Eurozone. The emergence of the financial crisis in 2008 combined with the lack of mobility of the labor at European level and the lack of fiscal reforms in the less competitive countries led to the current situation of the unsustainable public debts. The measures envisaged with the purpose to address this crisis are different in terms of level of assistance the competitive countries have to give to the others, the duration and value of wealth transfers that should be made between the states and the limit from which they will affect the fundamental stability and prosperity policy objectives of the European project.

Suggested Citation

  • Gheorghe Matei & Luiza Apostol, 2013. "Current Imbalances and Main Adjustment Mechanisms in the European Monetary Union," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(15), pages 22-30, December.
    • Handle: RePEc:aio:fpvfcf:v:1:y:2013:i:15:p:22-30
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    File URL: http://feaa.ucv.ro/FPV/015-003.pdf
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    References listed on IDEAS

    as
    1. ,, 2009. "Economics of Monetary Union," OUP Catalogue, Oxford University Press, edition 8, number 9780199563234.
    2. Wallace E. Oates & Wallace E. Oates, 2004. "An Essay on Fiscal Federalism," Chapters, in: Environmental Policy and Fiscal Federalism, chapter 22, pages 384-414, Edward Elgar Publishing.
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    Keywords

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    JEL classification:

    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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