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Going Forward from B to A? Proposals for the Eurozone Crisis

Author

Listed:
  • Massimo Amato
  • Luca Fantacci
  • Dimitri B. Papadimitriou
  • Gennaro Zezza

Abstract

After reviewing the main determinants of the current eurozone crisis, this paper discusses the feasibility of introducing fiscal currencies as a way to restore fiscal space in peripheral countries, like Greece, that have so far adopted austerity measures in order to abide by their commitments to eurozone institutions and the International Monetary Fund. We show that the introduction of fiscal currencies would speed up the recovery, without violating the rules of eurozone treaties. At the same time, these processes could help transition the euro from its current status as the single currency to the status of "common clearing currency," along the lines proposed by John Maynard Keynes at Bretton Woods as a system of international monetary payments. Eurozone countries could therefore move from "Plan B," aimed at addressing member-state domestic problems, to a "Plan A" for a better European monetary system.

Suggested Citation

  • Massimo Amato & Luca Fantacci & Dimitri B. Papadimitriou & Gennaro Zezza, 2016. "Going Forward from B to A? Proposals for the Eurozone Crisis," Economics Working Paper Archive wp_866, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_866
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    References listed on IDEAS

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    1. Dimitri B. Papadimitriou & Michalis Nikiforos & Gennaro Zezza, 2015. "Greece: Conditions and Strategies for Economic Recovery," Economics Strategic Analysis Archive sa_gr_5_15, Levy Economics Institute.
    2. Martina Cecioni & Giuseppe Ferrero, 2012. "Determinants of TARGET2 imbalances," Questioni di Economia e Finanza (Occasional Papers) 136, Bank of Italy, Economic Research and International Relations Area.
    3. Sergio Cesaratto, 2012. "Controversial and novel features of the Eurozone crisis as a balance of payment crisis," Department of Economics University of Siena 640, Department of Economics, University of Siena.
    4. Olivier J. Blanchard & Daniel Leigh, 2013. "Growth Forecast Errors and Fiscal Multipliers," American Economic Review, American Economic Association, vol. 103(3), pages 117-120, May.
    5. Dimitri B. Papadimitriou & Michalis Nikiforos & Gennaro Zezza, 2014. "Prospects and Policies for the Greek Economy," Economics Strategic Analysis Archive sa_feb_14, Levy Economics Institute.
    6. Sebastian Gechert & Henner Will, 2012. "Fiscal Multipliers: A Meta Regression Analysis," IMK Working Paper 97-2012, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Dimitri B. Papadimitriou & Michalis Nikiforos & Gennaro Zezza, 2016. "How Long Before Growth and Employment Are Restored in Greece?," Economics Strategic Analysis Archive sa_gr_1_16, Levy Economics Institute.
    8. Niklas Engbom & Ms. Enrica Detragiache & Ms. Faezeh Raei, 2015. "The German Labor Market Reforms and Post-Unemployment Earnings," IMF Working Papers 2015/162, International Monetary Fund.
    9. Gennaro Zezza, 2012. "The impact of fiscal austerity in the Eurozone," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 37-54.
    10. Dimitri B. Papadimitriou & L. Randall Wray & Yeva Nersisyan, 2010. "Endgame for the Euro? Without Major Restructuring, the Eurozone is Doomed," Economics Public Policy Brief Archive ppb_113, Levy Economics Institute.
    11. Dimitri B. Papadimitriou & L. Randall Wray, 2012. "Fiddling in Euroland as the Global Meltdown Nears," Economics Public Policy Brief Archive ppb_122, Levy Economics Institute.
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    Cited by:

    1. Dimitri B. Papadimitriou & Francesco Zezza & Gennaro Zezza, 2020. "When Will Italy Recover?," Economics Strategic Analysis Archive sa_10_20, Levy Economics Institute.
    2. Sergio Cesaratto & Gennaro Zezza, 2018. "What went wrong with Italy, and what the country should now fight for in Europe," FMM Working Paper 37-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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    More about this item

    Keywords

    Euro; Fiscal Currencies; Austerity; Current Account Imbalances; Clearing Union;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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