Euro : the time of reassessing it has come (Fifteen lessons and six conclusions)
Working paper in french.
The Eurozone is clearly in a time of crisis. However the liquidity crisis it is facing now, for all its urgency, is just the result of a deeper and longer internal competitiveness one. This crisis has been the result of making a monetary union before and without building a federal state. But building a federal state is at best a long and probably painful undertaking, whose success is not guaranteed. As a result the deepening of the crisis has been tremendous in the last months.
One solution now seen is the so-called « federalist jump » but this describe actually only making federal rules on expenditures and not sharing the revenue side. It is not to work both for political and economic reason. We survey also the potential issue of an asymmetric German inflation and found it a non-starter. This is letting the Eurozone only with age-deflation policies, which are reminiscent of deflationary policies implemented in the early 30 ’s with disastrous effect. In this situation the only sensible solution looks to be a coordinated dismantling of the Eurozone.