The Euro-Project at Risk
In contrast to Robert Mundell‘s Optimum Currency Area theory and his recommendation of forming a monetary union, the economic fundamentals of Euro area member countries have not harmonized. The opposite holds: the Euro core countries - most of all Germany, but also the Netherlands and Finland - increased productivity growth while limiting nominal wage growth. However, Mediterranean countries - particularly Greece, but also Spain, Portugal, and Italy - have dramatically lost international competitiveness. Although the overall balance of payments for the Euro area at large is almost balanced, internal disequilibria are skyrocketing and default risk premiums and tensions within the Euro area are rising, thus jeopardizing the stability of the monetary union. The findings confirm that a common currency without fiscal union is inherently unstable. The international financial and economic crisis has merely triggered events which highlight this instability. The paper discusses three possible scenarios for the future of the Euro: a laissez faire approach, a bailout, and finally an exit strategy for the Mediterranean countries, or an organized exit by a group of core countries led by Germany, forming their own smaller monetary union.
|Date of creation:||09 Jul 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: https://mpra.ub.uni-muenchen.de
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.:
- von Hagen,Juergen, .
"A note on the empirical effectiveness of formal fiscal restraints,"
Discussion Paper Serie B
155, University of Bonn, Germany.
- von Hagen, Jurgen, 1991. "A note on the empirical effectiveness of formal fiscal restraints," Journal of Public Economics, Elsevier, vol. 44(2), pages 199-210, March.
- Eichengreen, Barry & von Hagen, Jürgen, 1995.
"Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule,"
CEPR Discussion Papers
1247, C.E.P.R. Discussion Papers.
- Barry Eichengreen and Jurgen von Hagen., 1995. "Fiscal Policy and Monetary Union: Federalism, Fiscal Restrictions and the No-Bailout Rule," Center for International and Development Economics Research (CIDER) Working Papers C95-056, University of California at Berkeley.
- Strauch, Rolf R. & von Hagen, Jürgen, 2001. "Formal fiscal restraints and budget processes as solutions to a deficit and spending bias in public finances: US experience and possible lessons for EMU," ZEI Working Papers B 14-2001, ZEI - Center for European Integration Studies, University of Bonn.
- repec:oup:qjecon:v:117:y:2002:i:2:p:437-466 is not listed on IDEAS
- Michele Fratianni & Andreas Hauskrecht, 1998. "From the Gold Standard to a Bipolar Monetary System," Open Economies Review, Springer, vol. 9(1), pages 609-636, January.
- Poterba, James M, 1996.
"Budget Institutions and Fiscal Policy in the U.S. States,"
American Economic Review,
American Economic Association, vol. 86(2), pages 395-400, May.
- James M. Poterba, 1996. "Budget Institutions and Fiscal Policy in the U.S. States," NBER Working Papers 5449, National Bureau of Economic Research, Inc.
- Schmitz, Birgit & von Hagen, Jürgen, 2009. "Current Account Imbalances and Financial Integration in the Euro Area," CEPR Discussion Papers 7262, C.E.P.R. Discussion Papers.
- Corsetti, Giancarlo & Roubini, Nouriel, 1996. "European versus American Perspectives on Balanced-Budget Rules," American Economic Review, American Economic Association, vol. 86(2), pages 408-13, May.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:23750. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.