Will The Euro Bring Economic Crisis to Europe?

Philip Arestis and Malcolm Sawyer ()

Economics Working Paper Archive from Levy Economics Institute

Abstract: It has been argued that the eurozone will face considerable economic difficulties. These will take a number of forms, two of which could qualify as "crises." First, the euro was launched at a time when unemployment levels were high (10 percent of the workforce) and disparities in the experience of unemployment and standards of living were particularly severe. These high levels of unemployment are likely to continue in the foreseeable future, and the policy arrangements that surround the operation of the euro, notably the objectives of the European Central Bank and the workings of the Stability and Growth Pact, will have a deflationary bias. These levels of and disparities in unemployment could be termed a crisis. Second, the introduction of the euro and the associated institutional setting could well serve to exacerbate tendencies toward financial crisis, including the volatility and subsequent collapse of asset prices and runs on the banking system. Some additional forces of instability may arise from the current trade imbalances and the relationship between the dollar and the euro as two major global currencies. Further, the operating arrangements of the European System of Central Banks can be seen as inadequate to cope with such financial crises.

Date: 2001-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.levyinstitute.org/pubs/wp322.pdf (application/pdf)

Related works:
Chapter: Will the Euro Bring Economic Crisis to Europe? (2001)
Working Paper: Will the Euro Bring Economic Crisis to Europe? (2001)
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:lev:wrkpap:wp_322

Access Statistics for this paper

More papers in Economics Working Paper Archive from Levy Economics Institute
Bibliographic data for series maintained by Elizabeth Dunn ( this e-mail address is bad, please contact ).