Current Imbalances and Main Adjustment Mechanisms in the European Monetary Union

Gheorghe Matei and Luiza Apostol
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Gheorghe Matei: University of Craiova Faculty of Economics and Business Administration
Luiza Apostol: University of Pitesti

Finante - provocarile viitorului (Finance - Challenges of the Future), 2013, vol. 1, issue 15, 22-30

Abstract: The adoption of the euro as a common currency in 17 of the 27 member states of the European Union was achieved in a process that did not strictly observe the recommendations of the economic theory of an optimal monetary area. The elimination of exchange rates before the establishment of European Monetary Union represented the renunciation of an automatic macroeconomic stabilization mechanism and generated major commercial and financial imbalances between the countries in the Eurozone. The emergence of the financial crisis in 2008 combined with the lack of mobility of the labor at European level and the lack of fiscal reforms in the less competitive countries led to the current situation of the unsustainable public debts. The measures envisaged with the purpose to address this crisis are different in terms of level of assistance the competitive countries have to give to the others, the duration and value of wealth transfers that should be made between the states and the limit from which they will affect the fundamental stability and prosperity policy objectives of the European project.

Keywords: single currency; fiscal imbalances; fiscal integration; financial crisis (search for similar items in EconPapers)
JEL-codes: E61 F42 H63 H77 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:aio:fpvfcf:v:1:y:2013:i:15:p:22-30

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