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There is an alternative: A two-tier European currency community

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  • Scharpf, Fritz W.

Abstract

The performance of EMU member economies is shaped by different and structurally entrenched "growth models" whose success depends on specific macro-regimes - restrictive for export-led growth, accommodating for demand-led growth. These two types of models cannot be equally viable under a uniform macro regime, and their divergence threatens the stability of the EMU. The present attempt to enforce structural convergence in the euro¬zone appears economically ineffective and lacks democratic legitimacy on the national and the European level. Assuming that complete integration in a democratic federal state is presently unattainable, the paper presents the outline of a more flexible European Currency Community that would include a smaller and more coherent EMU and the member states of a revised "Exchange Rate Mechanism II" (ERM) whose currencies are flexibly linked to the euro. It would restore the external economic viability of autonomous domestic policy choices, and it would protect its members against speculative currency fluctuations.

Suggested Citation

  • Scharpf, Fritz W., 2018. "There is an alternative: A two-tier European currency community," MPIfG Discussion Paper 18/7, Max Planck Institute for the Study of Societies.
  • Handle: RePEc:zbw:mpifgd:187
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    References listed on IDEAS

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    1. Scharpf, Fritz W., 2011. "Monetary union, fiscal crisis and the preemption of democracy," MPIfG Discussion Paper 11/11, Max Planck Institute for the Study of Societies.
    2. Ruggie, John Gerard, 1982. "International regimes, transactions, and change: embedded liberalism in the postwar economic order," International Organization, Cambridge University Press, vol. 36(2), pages 379-415, April.
    3. Sinn, Hans-Werner, 2017. "The Euro Trap: On Bursting Bubbles, Budgets, and Beliefs," OUP Catalogue, Oxford University Press, number 9780198791447.
    4. Fritz W. Scharpf, 2011. "Monetary Union, Fiscal Crisis and the Preemption of Democracy," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 6, London School of Economics / European Institute.
    5. Paul De Grauwe, 2013. "The European Central Bank as Lender of Last Resort in the Government Bond Markets," CESifo Economic Studies, CESifo, vol. 59(3), pages 520-535, September.
    6. Schelkle, Waltraud, 2017. "The Political Economy of Monetary Solidarity: Understanding the Euro Experiment," OUP Catalogue, Oxford University Press, number 9780198717935.
    7. Hans-Werner Sinn, 2015. "Der Euro: Von der Friedensidee zum Zankapfel," Books, by Staff of the ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 2015001.
    8. Hans-Werner Sinn, 2015. "Der Euro: Von der Friedensidee zum Zankapfel," Books, by Staff of the ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 201510, December.
    9. Scharpf, Fritz W., 2011. "Monetary union, fiscal crisis and the preemption of democracy," LSE Research Online Documents on Economics 53448, London School of Economics and Political Science, LSE Library.
    10. Lucio Baccaro & Jonas Pontusson, 2016. "Rethinking Comparative Political Economy," Politics & Society, , vol. 44(2), pages 175-207, June.
    11. Tsoukalis, Loukas, 2016. "In Defence of Europe: Can the European Project Be Saved?," OUP Catalogue, Oxford University Press, number 9780198755319.
    12. Fritz W. Scharpf, 2011. "Monetary Union, Fiscal Crisis and the Preemption of Democracy," LEQS – LSE 'Europe in Question' Discussion Paper Series 36, European Institute, LSE.
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    Cited by:

    1. Martin Höpner, 2020. "Karlsruhe verdient Anerkennung — Zum PSPP-Urteil des Bundesverfassungsgerichts vom 5. Mai 2020
      [Karlsruhe Deserves Recognition — On the PSPP Ruling of the Federal Constitutional Court of 5 May 2020
      ," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 100(6), pages 441-445, June.
    2. Loewald, Christopher & Wörgötter, Andreas, 2019. "Do monetary unions dream of structural reforms?," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 01/2019, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).

    More about this item

    Keywords

    autonomy; currency coordination; EMS; EMU; ERM; EU; legitimacy; Autonomie; EWS; EWU; Legitimität; Währungskoordination; WKM;

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