Delaying the Next Global Meltdown

Dimitri Papadimitriou and L. Randall Wray

Economics One-Pager Archive from Levy Economics Institute

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.

Date: 2012-02
New Economics Papers: this item is included in nep-mac, nep-mon and nep-pke
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