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Title:The euro and its guardian of stability: The fiction and reality of the 10th anniversary blast PDF Logo
Authors:Bibow, Jörg
Issue Date:2009
Series/Report no.:Working paper, Levy Economics Institute 583
Abstract:This paper investigates why Europe fared particularly poorly in the global economic crisis that began in August 2007. It questions the self-portrait of Europe as the victim of external shocks, pushed off track by reckless policies pursued elsewhere. It argues instead that Europe had not only contributed handsomely to the buildup of global imbalances since the 1990s and experienced their implosive unwinding as an internal crisis from the beginning, but that it had also nourished its own homemade intra-Euroland and intra-EU imbalances, the simultaneous implosion of which has further aggravated Europe's predicament. To keep its own house in order in the future, Euroland must shun the outdated 'stability oriented' policy wisdom inherited from Germany's mercantilist past and Bundesbank mythology. Steps toward a fiscal union to back the euro are also warranted.
Subjects:economic and monetary union
Euro
European Central Bank
global imbalances
global crisis
intra-area imbalances
competitiveness positions
policy coordination
tax-push inflation
financial supervision
mercantilism
JEL:E30
E42
E52
E58
E61
E63
E65
F36
Document Type:Working Paper
Appears in Collections:Working Papers, Levy Economics Institute of Bard College

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