EMU: The Sustainability Issue
The euro area is experiencing a sovereign debt crisis; as a result, the foundations of its monetary union have been shattered. This crisis, which is an extension of an international financial crisis, shows that the European Union is not an optimum currency area. Robert Mundell’s work remains an indispensable reference on this subject: a monetary union among greatly different countries and propelled by considerably weak solidarity is problematic. In the present context, the possibilities are limited for permanently improving the situation, for transforming sovereign debts into sustainable ones, and for regaining a higher level of growth. Experience seems to show that a single currency cannot accommodate national budgetary policies and that national policies are hindered by the existence of a single currency in a context of asymmetries. Eventually, a scenario where the euro area would collapse becomes highly probable. This paper puts forward a model of debt sustainability and discusses eight related proposals.
|Date of creation:||28 Mar 2014|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 33 1 53 63 36 00
Web page: http://www.ipag.fr
More information through EDIRC
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.:
- Martin Feldstein, 1998.
"The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability,"
NBER Working Papers
6150, National Bureau of Economic Research, Inc.
- Martin Feldstein, 1997. "The Political Economy of the European Economic and Monetary Union: Political Sources of an Economic Liability," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 23-42, Fall.
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Cukierman, Alex & Lippi, Francesco, 1999.
"Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence,"
European Economic Review,
Elsevier, vol. 43(7), pages 1395-1434, June.
- Cukierman, A. & Lippi, F., 1998. "Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment - Theory and Some Evidence," Discussion Paper 1998-116, Tilburg University, Center for Economic Research.
When requesting a correction, please mention this item's handle: RePEc:ipg:wpaper:2014-196. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ingmar Schumacher)
If references are entirely missing, you can add them using this form.