The six flaws of the Eurozone

Charles Wyplosz

Economic Policy, 2016, vol. 31, issue 87, 559-606

Abstract: SUMMARY When it was created, it was reasonable to think that the architecture of the monetary union was not perfect. It was also likely that the imperfections would lead to difficulties, possibly even crises. This article identifies six flaws, most of which had been identified even before the launch of the euro. It starts by pinpointing why the Eurozone, a bold and unprecedented experiment, is inherently fragile. It is not conducive to the convergence of national inflation rates, it is not an optimum currency area, and it is not a federal state. Taking these characteristics as given, the article argues that the Eurozone needs to address their implications. It observes that it has not been the case so far, hence the six flaws: fiscal discipline has not been achieved; the need for a Banking Union, which has finally been recognized and only partly implemented; the ECB is not a complete and fully independent central bank; some member countries need a sovereign debt relief; structural reforms are badly needed but intrusiveness cannot be the solution; the governance of the Eurozone is not designed for crisis management.

Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://hdl.handle.net/10.1093/epolic/eiw008 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:ecpoli:v:31:y:2016:i:87:p:559-606.

Access Statistics for this article

Economic Policy is currently edited by Ghazala Azmat, Roberto Galbiati, Isabelle Mejean and Moritz Schularick

More articles in Economic Policy from CEPR, CESifo, Sciences Po Contact information at EDIRC., CES Contact information at EDIRC., MSH Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press (joanna.bergh@oup.com).