Since 2014
A Fragile Eurozone in Search of a Better Governance
The Economic and Social Review
View Archive Info| Field | Value | |
| Title |
A Fragile Eurozone in Search of a Better Governance
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| Creator |
De Grauwe, Paul
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| Subject |
—
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| Description |
When entering a monetary union, member-countries change the nature of their sovereign debt in a fundamental way, i.e. they cease to have control over the currency in which their debt is issued. As a result, financial markets can force these countries’ sovereigns into default. In this sense member countries of a monetary union are downgraded to the status of emerging economies. This makes the monetary union fragile and vulnerable to changing market sentiments. It also makes it possible that self-fulfilling multiple equilibria arise. I analyse the implications of this fragility for the governance of the Eurozone. I conclude that the new governance structure (ESM) does not sufficiently recognise this fragility. Some of the features of the new financial assistance are likely to increase this fragility. In addition, it is also likely to rip member-countries of their ability to use the automatic stabilisers during a recession. This is surely a step backward in the long history of social progress in Europe. I suggest a different approach to deal with these problems.
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| Publisher |
The Economic and Social Review
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| Contributor |
—
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| Date |
2013-02-20
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://www.esr.ie/article/view/52
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| Source |
The Economic and Social Review; Vol 43, No 1, Spring (2012); 1–30
0012-9984 |
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| Language |
eng
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| Relation |
http://www.esr.ie/article/view/52/45
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| Rights |
Copyright (c) 2015 The Economic and Social Review
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