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The Problems of the Economic and Monetary Union: Is There Any Escape?


  • Philip Arestis

    (University of Cambridge & University of the Basque Country)

  • Malcolm Sawyer

    () (University of Leeds)


The financial crisis and recession have highlighted a range of problems with the ‘euro project’, but these problems and difficulties are related to some fundamental issues for the euro. The convergence criteria established by the Maastricht Treaty focused on nominal rather than real variables, failed to relate to issues such as current account positions. There are well-known difficulties of macroeconomic policies under the Stability and Growth Pact including its deflationary nature and the ‘one size fits all problem’ of imposing common deficit requirements on all countries. The economic performance of the eurozone countries is briefly reviewed with attention paid to the differential inflation rates; also accounted for are the changes in competitiveness as well as the current account deficits, and their implications for the future of economic performance within the eurozone, and the euro itself. The patterns of current account deficits and surpluses are linked with unemployment, lack of competitiveness and budget deficit issues. The nature of the reforms to the operations of the eurozone is examined. The political limits (including those arising from the nature of the Treaty of Lisbon) and the ideological constraints (associated with the neo-liberal agenda) on serious reforms are discussed from which the general conclusion is that the needed reforms will not be carried through. This discussion also includes consideration of the possible role for a substantial EU-level fiscal policy and some other aspects of political union. It is argued that the deep-seated problems are unlikely to be resolved, casting a dark shadow over the future of the euro.

Suggested Citation

  • Philip Arestis & Malcolm Sawyer, 2010. "The Problems of the Economic and Monetary Union: Is There Any Escape?," Journal of Economic Analysis, National Technical University of Athens, vol. 1(1), pages 1-14.
  • Handle: RePEc:tua:journl:v:1:y:2010:i:1:p:1-14

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    Cited by:

    1. Jorge Uxó & Jesús Paúl & Eladio Febrero, 2012. "European economic policy and the problem of current account imbalances: the case of Germany and Spain," Chapters,in: Keynes’s General Theory for Today, chapter 12, pages 207-225 Edward Elgar Publishing.
    2. Jesper Jespersen & Mogens Ove Madsen (ed.), 2012. "Keynes’s General Theory for Today," Books, Edward Elgar Publishing, number 15049, April.

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