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Stateless Euro: The Euro Crisis and the Revenge of the Chartalist Theory of Money

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  • Miguel Otero-Iglesias

Abstract

This article argues that contemporary optimum currency area (OCA) theory is limited in its capacity to understand the euro crisis because it emanates from the commodity-exchange theory of money and therefore under-estimates the necessity of a (sovereign) political authority to underpin any given monetary space. An alternative conception of money, based on the chartalist approach, is more useful for grasping the fundamental weaknesses in European monetary union (EMU). Overall, the argument is that EMU will remain a fragile edifice as long as the eurozone does not create a centralized and legitimate political authority capable of taxing eurozone citizens at the European level. In order for this to be achieved, France and Germany need to resolve the ‘game of chicken’ in which they are entangled and strengthen their co-operative efforts towards creating a European sovereign.

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  • Miguel Otero-Iglesias, 2015. "Stateless Euro: The Euro Crisis and the Revenge of the Chartalist Theory of Money," Journal of Common Market Studies, Wiley Blackwell, vol. 53(2), pages 349-364, March.
  • Handle: RePEc:bla:jcmkts:v:53:y:2015:i:2:p:349-364
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    File URL: http://hdl.handle.net/10.1111/jcms.12223
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    1. Lars Jonung & Eoin Drea, 2009. "The euro: It can't happen, It's a bad idea, It won't last. US economists on the EMU, 1989-2002," European Economy - Economic Papers 2008 - 2015 395, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Ben Crum, 2013. "Saving the Euro at the Cost of Democracy?," Journal of Common Market Studies, Wiley Blackwell, vol. 51(4), pages 614-630, July.
    3. Issing,Otmar, 2008. "The Birth of the Euro," Cambridge Books, Cambridge University Press, number 9780521516730, July - De.
    4. Nicholas Crafts, 2014. "What Does the 1930s' Experience Tell Us about the Future of the Eurozone?," Journal of Common Market Studies, Wiley Blackwell, vol. 52(4), pages 713-727, July.
    5. C. Fred Bergsten & Jacob Funk Kirkegaard, 2012. "The Coming Resolution of the European Crisis," Policy Briefs PB12-1, Peterson Institute for International Economics.
    6. Paul De Grauwe, 2012. "The Governance of a Fragile Eurozone," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 45(3), pages 255-268, September.
    7. Dyson, Kenneth & Featherstone, Kevin, 1999. "The Road To Maastricht: Negotiating Economic and Monetary Union," OUP Catalogue, Oxford University Press, number 9780198296386.
    8. Issing,Otmar, 2008. "The Birth of the Euro," Cambridge Books, Cambridge University Press, number 9780521731867.
    9. Paul De Grauwe & Yuemei Ji, 2012. "Mispricing of Sovereign Risk and Macroeconomic Stability in the Eurozone," Journal of Common Market Studies, Wiley Blackwell, vol. 50(6), pages 866-880, November.
    10. Paul De Grauwe, 2006. "What Have we Learnt about Monetary Integration since the Maastricht Treaty?," Journal of Common Market Studies, Wiley Blackwell, vol. 44, pages 711-730, November.
    11. Paul De Grauwe & Yuemei Ji, 2013. "Fiscal Implications of the ECB’s Bond Buying Program," Open Economies Review, Springer, vol. 24(5), pages 843-852, November.
    12. C. Fred Bergsten & Jacob Funk Kirkegaard, 2012. "The Coming Resolution of the European Crisis: An Update," Policy Briefs PB12-18, Peterson Institute for International Economics.
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    1. repec:bla:jcmkts:v:55:y:2017:i:4:p:744-761 is not listed on IDEAS
    2. van Riet, Ad, 2016. "Safeguarding the euro as a currency beyond the state," Occasional Paper Series 173, European Central Bank.
    3. repec:bla:jcmkts:v:55:y:2017:i:6:p:1380-1397 is not listed on IDEAS

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