The Post-pandemic Euro: Macroeconomic Lessons Learned from Crises and Economic Orthodoxies

In 1999, the euro was launched on the basis of treaties structured around the new economic orthodoxy that replaced Keynesianism. The Great Recession, the Euro Crisis and now the Pandemic Crisis, all of them deflationary demand crises which are incompatible with such an orthodoxy, have had a similar effect and have blown away the economic orthodoxy of the last 40 years. The European Union (EU) entrusted all of its economic regulation to this orthodoxy and has been the main victim of its failures since 2008. The Great Recession brought about public deficit and, due to the requirement of the treaties, procyclical fiscal policies were applied, causing a W-shaped crisis that no other economies in the world suffered, while the European Central Bank (ECB), tied to its objective of controlling inflation, was unable to react suitably. The result was growing citizen detachment from the EU project. We review how economic crises have been exposing the mistake of creating the EU in the image and likeness of the economic orthodoxy of the moment and how Europe has had to overcome, one by one, the rules established in the treaties in order to implement effective policies and so combat economic crises.