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

Paolo Savona


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.


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

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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),


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