Failing Institutions Are at the Core of the Euro Crisis

Yochanan Shachmurove and Alojzy Nowak ()
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Alojzy Nowak: University of Warsaw, Poland

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: The European Union was created to promote economic, cultural, and regional prosperity. However, the Global Financial Crisis demonstrates that its economic institutions are flawed. While each sovereign state in the Eurozone forfeits the control of its money supply, the lack of a common fiscal institution allows individual countries to pursue their own political and financial agendas. The on-going economic hardship emphasizes the critical role of economic and political institution ions. This paper analyzes both beneficial and perverse incentives of joining the European Union, discusses the consequences of deficient economic institutions and provides potential solutions towards the alleviation of the crisis.

Keywords: European Union; Eurozone; Harmonized Index of Consumer Prices; Portugal, Ireland, Greece and Spain (PIGS); Fiscal Union; Financial Crises; Maastricht Criteria; Maastricht Treaty; Exchange Rate; Euro (search for similar items in EconPapers)
JEL-codes: B52 F00 F01 F33 K0 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2012-10-18
New Economics Papers: this item is included in nep-eec, nep-hme and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:pen:papers:12-041

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