Since its creation and introduction in the early 2000s, the euro so fascinated the people, leaders and institutions worldwide. Supposed to bring the European peoples harmonizing monetary and financial system, facilitating trade between countries, and avoid tedious conversion processes,despite all these political aspects, the euro remains stronger for 5 years, also its dark side, even if it will survive the crisis through the old continent for over 5 years, nothing is for sure that currency all facing nowadays, for example, economies that are doing well except Germany have not adopted this currency is the case in Switzerland, England and other open economies. While the euro is you guilty of all wrongs? Therefore are the markets and bubble plunging economies into poverty and destroys jobs already very precarious.
It is with a great sheepish unanimously that the press picked up yesterday, Nouriel Roubini's article appeared in the Financial Times, announcing the future collapse of the euro area. The discussion of the article is limited to the argument from authority, the version of Madame Irma said Roubini, who «predicted the subprime crisis," says the euro zone will explode. Cover!
First, never Roubini predicted the subprime crisis, merely announce every year between 2001 and 2006 a currency crisis in the U.S. we are still waiting for his treat advertising in 2007 with great blows of "I l ' told you so "and suddenly acquire the status of cosmoplaneterial media guru. Some make the effort to remember that ads Roubini may be interested. Second, journalists who do their job are not limited to arguments of authority, but consider the arguments on their content. Some are able to do so, they are unfortunately very rare. Third, no one today can honestly claim to predict the future of the euro. You can play the watch stopped giving the correct time twice a day (which is the case for all media gurus prediction) but it is a mockery of the world.
[...] The demands placed from Ireland, which the Germans and French are asking to increase its corporate tax rate, are perceived by the Irish as a way to focus on companies in these countries at the expense of the only way that has found Ireland to grow. This suspicion is probably justified. And extent of the skills that should be transmitted to the European authorities to run the euro is considerable. This concerns not only public budgets as a whole ( level of deficits, debt, revenue and expenses) but also anything that is likely to produce shifts in competitiveness between countries. [...]
[...] It was therefore possible to have a world composed of nation-states economically highly integrated, in which people had to endure episodes of sustained deflation (in case of problems, they sent troops quell protesters The spread of democracy has made intolerable to the extreme point of the 30s, with a huge rise of protectionism and the abandonment of the gold standard. Bretton Woods was a compromise: limited economic integration, and the exercise of democracy within sovereign states. Victim of its own success, this compromise does not work. The Rodrik trilemma thus illustrates the problem of European economic integration. Amplify it to move to the single currency requires either abandon national sovereignty or democracy. [...]
[...] Financial regulation illustrates this problem. Populations are extremely favorable in all EU countries. But in an integrated economy, financial institutions are mobile. States are unable to strongly regulate finance lest their businesses move into less regulated countries: the result is a race to the lowest bidder regulatory. The only solution would be to transfer the decisions on the subject to a supranational body that could satisfy citizens' aspirations in this area, blowing the passage of state sovereignty. Except that sovereignty does not disappear like that. [...]
[...] These have some truth, but miss the point: the structural problems of the euro as such. To understand this, two tools are useful: the incompatibility of Mundell and political trilemma Rodrik triangle. The reading grid for understanding the euro is well known: it is the theory of optimum currency area; the starting point is the incompatibility triangle Mundell. It is impossible to have simultaneously a group of countries: - Open capital flows - Fixity of exchange rates - Monetary policy independently in different countries. It can, at best, be only two of the three. [...]
[...] In the Greek case, the rejection of national policy is such that it is possible to consider, at least for a time, an external control to be legitimate. But this situation is sustainable? If the states retain their sovereignty, it will be able to act sustainably against the wishes of the people; the alternative is that the economic and monetary union explodes. As Scharpf shows in what is the best analysis to date of the economic and European policy, the initial compromise of EMU must be understood in terms of the legitimacy of political power. [...]
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