The Euro and Its Guardian of Stability--The Fiction and Reality of the 10th Anniversary Blast

Jörg Bibow

Economics Working Paper Archive from Levy Economics Institute

Abstract: This paper investigates why Europe fared particularly poorly in the global economic crisis that began in August 2007. It questions the self-portrait of Europe as the victim of external shocks, pushed off track by reckless policies pursued elsewhere. It argues instead that Europe had not only contributed handsomely to the buildup of global imbalances since the 1990s and experienced their implosive unwinding as an internal crisis from the beginning, but that it had also nourished its own homemade intra-Euroland and intra-EU imbalances, the simultaneous implosion of which has further aggravated Europe's predicament. To keep its own house in order in the future, Euroland must shun the outdated "stability oriented" policy wisdom inherited from Germany's mercantilist past and Bundesbank mythology. Steps toward a fiscal union to back the euro are also warranted.

Keywords: Economic and Monetary Union; Euro; European Central Bank; Global Imbalances; Global Crisis; Intra-area Imbalances; Competitiveness Positions; Policy Coordination; Tax-push Inflation; Financial Supervision; Mercantilism (search for similar items in EconPapers)
JEL-codes: E30 E42 E52 E58 E61 E63 E65 F36 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-pke
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Citations: View citations in EconPapers (4)

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Chapter: The Euro and its Guardian of Stability: Fiction and Reality of the 10th Anniversary Blast (2012)
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