The Euro: Why it Failed PDF
Preview The Euro: Why it Failed
The Euro Economic and Monetary Union Eurozone ERM II members EU members without ERM II Non-EU members with Euro Iceland Finland Sweden Norway Estonia Russia Latvia Den- mark Ireland Lithuania United Belarus Kingdom Nether- lands Poland Belgium Germany Ukraine Luxembourg Czech Republic Slovakia Mol- France Swlaitnzder- Liecht Austria Hungary dova Slove- Romania nia Croatia Monaco MSaarinno BHoesvnrziineaa gaon-d Serbia Andorra Monte- Bulgaria Portugal Italy negro Spain Vatican City Al- Mdoanceia- ba- nia Turkey Greece Morocco Algeria Tunisia Malta Cyprus EUandtheEurozone(Map) JesperJespersen The Euro Why it Failed JesperJespersen RoskildeUniversity Roskilde,Denmark ISBN978-3-319-46387-2 ISBN978-3-319-46388-9(eBook) DOI10.1007/978-3-319-46388-9 LibraryofCongressControlNumber:2016951679 ©TheEditor(s)(ifapplicable)andTheAuthor(s)2016 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher,whetherthewholeorpartofthematerialisconcerned,specificallytherightsof translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval,electronicadaptation,computersoftware,orbysimilarordissimilarmethodology nowknownorhereafterdeveloped. Theuseofgeneraldescriptivenames,registerednames,trademarks,servicemarks,etc.inthis publicationdoesnotimply,evenintheabsenceofaspecificstatement,thatsuchnamesare exemptfromtherelevantprotectivelawsandregulationsandthereforefreeforgeneraluse. Thepublisher,theauthorsandtheeditorsaresafetoassumethattheadviceandinformation in this book are believed to be true and accurate at the date of publication. Neither the publishernortheauthorsortheeditorsgiveawarranty,expressorimplied,withrespectto thematerialcontainedhereinorforanyerrorsoromissionsthatmayhavebeenmade. Coverillustration:Modernbuildingwindow©saulgranda/Getty Printedonacid-freepaper ThisPalgraveMacmillanimprintispublishedbySpringerNature TheregisteredcompanyisSpringerInternationalPublishingAG Theregisteredcompanyaddressis:Gewerbestrasse11,6330Cham,Switzerland P REFACE I have worked on European monetary integration ever since I wrote my PhDdissertationon‘TheoriesofBalanceofPaymentswithspecialregard to the Danish Capital Account’, which was defended in September 1979 at the European University Institute (EUI), Florence, Italy. Since then, it has been a dramatic period in the history of European macro- economic development. I have followed it closely and have taken an active part in debates leading up to the two referenda we have had in Denmark on the participation in the European Monetary Union in the years1992and2000.Eachtimetheproposalwasrejected,amajorityof voters did not find the arguments of giving up monetary sovereignty in favour of an uncertain act of European integration, although the positive economic arguments at that time were presented by the experts as pretty undisputable. Thetitleofthebookisreferringtothemismatchbetweentheprosper- ous prospects, which supported the introduction of the euro, and the devastating macroeconomic realities, which later met a number of Euro countries. So, in many ways it is rather the economic arguments that failed.TheinstitutionalframeworksurroundingtheEurocouldnotover- comethechallengesrelatedtotheintroductionofthecommoncurrency. Tothecontrary,itwillbearguedinthebook,thisframeworkwasderived from a misleading and unrealistic macroeconomic theory. Therefore, the Eurofailedinitspresentform.Whatthefuturewillbringisimpossibleto say. It is a matter of political aspiration, ideology, democratic processes and an, hopefully, improved understanding of the working of European macroeconomicandmonetary reality. v vi PREFACE Duringtheyears,Ihavebenefittedalotfromresearch,supervisionand teachingattheEUI,atCopenhagenUniversityandforthelast20yearsat Roskilde University, Denmark. In addition, I have deepened my under- standing from being a research fellow in Cambridge, UK, and Dijon, France. The importance of Professor Niels Thygesen, University of Copenhagen, as a continued source of respectful inspiration cannot be exaggerated. In addition, I would like to thank my colleague Bruno Amoroso for a countless number of conversations on Southern Europe andScandinavia–howcantheybesodifferentinmanyrespects?Practical matterscouldnothavebeensolvedwithouttheefficienthelpfromDaniel Rayburn (language) and Henrik Jensen (figures). Finally, I have got financialsupport from OttoBruun’s Fond, which ishighly appreciated. Copenhagen,Denmark Jesper Jespersen July2016 C ONTENTS 1 EurozoneCrises 1 2 ‘Optimal’ Currency Area:WhatDoesIt Mean? 9 3 WhyWas the EMU Established? DifferentPerspectives 23 4 Balance-of-PaymentsImbalanceshaveBecome the ‘Achilles Heel’of the EMU 39 5 PublicSectorDeficitandDebt: Causeor Effect? 59 6 Macroeconomic Imbalances:Unemployment andInequality 87 7 DistressedEuropean Central Bankand FinancialInstability 103 8 AnyFutureof the Euro? 119 Bibliography 127 Index 131 vii L F IST OF IGURES Fig.1.1 UnemploymentwithinandoutsidetheEurozone 4 Fig.1.2 Macroeconomicimbalance,GermanyandSpain 6 Fig.2.1 Monetaristpresentationofshort-termcostandpersistent benefitofjoiningamonetaryunion 17 Fig.4.1 Balanceofpayments(PercentageofGDP) 43 Fig.4.2 Aconsolidatedeconomicmodel:book-keepingentities 53 Fig.4.3 Aconsolidatedeconomicmodel:book-keepingentities 55 Fig.5.1 Fiscalpolicy:Underlyingprimarybudget,2014 75 Fig.5.2 Spain:Unemployment,publicsectorandfiscalpolicy 76 Fig.A1 Spain:Privateexcesssavingsversusunemployment 83 Fig.A2 Spain:Privateexcesssavings–balanceofpayments 84 Fig.A3 Spain:Unemploymentandpublicsectorbudget 84 Fig.6.1 UnemploymentEurozoneandnon-Eurozone 88 Fig.6.2 FiscalpolicyinEurozoneandnon-Eurocountries 94 Fig.6.3 Internationalcompetitiveness,Eurocountries 96 Fig.6.4 MacroeconomicimbalancesinthemajorEUcountries 100 Fig.7.1 Thedollar/euroexchangerate 109 Fig.7.2 Monetaryinstabilityandpriceinflation 111 Fig.7.3 Longtermrateofinterest,Euro-countries 113 Fig.7.4 BalanceofPayments,currentaccount,2014 117 ix L T IST OF ABLES Table4.1 Accumulatedforeignandpublicdebt,1998–2014 52 Table5.1 Privatesector:excesssavings 68 Table6.1 Peopleatriskofpovertyorsocialexclusion 97 Table6.2 Ginicoefficients 98 xi
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