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The Logic of the Euro, Its Institutional Architecture and the Related Implications

Paolo Savona

Abstract


The Euro is the logical consequences of the European common market according to the principle ‘one market, one money’, to avoid unfair competitionchanging internal monetary parities. Anyhow it is a necessary but insufficient condition being the institutional architecture weak. The European Central Bank cannot perform as the other main central banks: cannot act as lender of last resort or intervene on the exchange market to counteract speculation; the risks on national exchange rates has been transferred to member-countries sovereign debts withouta non-deflationary solution to reenter the excesses in theagreed ratio on GDP. The Eurozone is a non-optimal currency area without a policy Mundell’s type. The suggested solutionsby the Europeans are to reform national labor markets and public bureaucracies, and by the idealists to create a political union.


Keywords


Euro; Market Competition; Central Banks’ Powers; Non-Optimal Currency Area; Rodrik Trilemma.

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References


Treaties of the European Union, ECSC-European Coal and Still Community (1951), EEC-European Economic Community (1957), EC-European Community (1965);EMS-European Monetary System (1978); European Parliament (1979); SEA-Single European Act and Schengen Agreement (1985); EU-European Union (1992); ECB-European Central Bank (1998); Treaty of Lisbon (2007),

https://en.wikipedia.org/wiki/Treaties_of_the_European_Union

Draghi, Mario (2014), Introductory Statement,Hearingbefore the Committee on Economic and Monetary Affairs of the EuropeanParliament,November 17

Federal Open Market Committee Statement, and Chair Yellen’s Press Conference (2015), December 16

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Mundell, Robert (1961), A Theory of Optimum Currency Areas, in American Economic Review, no. 51 (4), 1961, pp. 657-665

Roosevelt, Franklin Delano (1941), State of the Union Address, January 6

Savona, Paolo, and Farese Giovanni (2017), “How to reconcile Democracy, the State and the Global Market”, in World Economics, Vol. 18, No. 2, April-June, pp. 123-137




DOI: http://dx.doi.org/10.18686/fm.v2i2.959

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