Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110018
Authors: 
Bibow, Jörg
Year of Publication: 
2013
Series/Report no.: 
Working Paper, Levy Economics Institute 780
Abstract: 
The euro crisis remains unresolved even as financial markets may seem calm for now. The current euro regime is inherently flawed, and recent reforms have failed to turn this dysfunctional regime into a viable one. Our investigation is informed by the "cartalist" critique of traditional "optimum currency area" theory (Goodhart 1998). Various proposals to rescue the euro are assessed and found lacking. A "Euro Treasury" scheme operating on a strict rule and specifically designed not to be a transfer union is proposed here as a condition sine qua non for healing the euro's potentially fatal birth defects. The Euro Treasury proposed here is the missing element that will mend the current fiscal regime, which is unworkable without it. The proposed scheme would end the currently unfolding euro calamity by switching policy from a public thrift campaign that can only impoverish Europe to a public investment campaign designed to secure Europe's future. No mutualization of existing national public debts is involved. Instead, the Euro Treasury is established as a means to pool eurozone public investment spending and have it funded by proper eurozone treasury securities.
Subjects: 
Euro Crisis
Currency Union
Fiscal Union
Transfer Union
Cartalism
Lender of Last Resort
European Integration
JEL: 
E02
E42
E58
E61
E62
F36
G01
Document Type: 
Working Paper

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