The Breakup of the Euro Area

Barry Eichengreen

No 13393, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The possibility that the euro area might break up was being raised even before the single currency existed. These scenarios were then lent new life five or six years on, when appreciation of the euro and problems of slow growth in various member states led politicians to blame the European Central Bank for disappointing economic performance. Highly-placed European officials reportedly discussed the possibility that one or more participants might withdraw from the monetary union. How seriously should we take these scenarios? And how significant would be the economic and political consequences? It is unlikely, I argue here, that one or more members of the euro area will leave in the next ten years; total disintegration of the euro area is even more unlikely. While other authors have minimized the technical difficulties of reintroducing a national currency, I suggest that those technical difficulties would be quite formidable. Nor is it certain that the economic problems of the participating member states would be significantly ameliorated by abandoning the euro. And even if there are immediate economic benefits, there would be longer-term political costs.

JEL-codes: F15 F33 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-cba, nep-eec and nep-mon
Note: DAE IFM POL
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Citations: View citations in EconPapers (45)

Published as The Breakup of the Euro Area , Barry Eichengreen. in Europe and the Euro , Alesina and Giavazzi. 2010

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