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Delaying the Next Global Meltdown

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  • Dimitri B. Papadimitriou
  • L. Randall Wray

Abstract

It's a mistake to interpret the unfolding disaster in Europe as primarily a "sovereign debt crisis." The underlying problem is not periphery profligacy, but rather the very setup of the European Monetary Union (EMU)—a setup that even now prevents a satisfactory resolution to this crisis. The central weakness of the EMU is that it separates nations from their currencies without providing them with adequate overarching fiscal or monetary policy structures—it's like a United States without a Treasury or a fully functioning Federal Reserve. Without addressing this basic structural weakness, Euroland will continue to stumble toward the cliff—and threaten to pull a tottering US financial system over the edge with it.

Suggested Citation

  • Dimitri B. Papadimitriou & L. Randall Wray, 2012. "Delaying the Next Global Meltdown," Economics One-Pager Archive op_24, Levy Economics Institute.
    • Handle: RePEc:lev:levyop:op_24
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