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Is the Eurozone Doomed? The Rescue Plan Cannot Address the Central Problem

Dimitri Papadimitriou, L. Randall Wray and Yeva Nersisyan

Economics One-Pager Archive from Levy Economics Institute

Abstract: The trillion-dollar rescue package European leaders aimed at the continent's growing debt crisis in May might well have been code-named Panacea. Stocks rose throughout the region, but the reprieve was short-lived: markets fell on the realization that the bailout would not improve government finances going forward. The entire rescue plan rests on the assumption that the eurozone's "problem children" can eventually get their fiscal houses in order. But no rescue plan can address the central problem: that countries with very different economies are yoked to the same currency.

Date: 2010-11
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