The euro – lessons from history

in Ögren, A. and Øksendal L-F (Eds.) The Gold Standard Peripheries – Monetary policy, adjustment and flexibility in a global setting Palgrave macmillan Publishers London, 2012

The comparative advantage of the historical profession is undoubtedly the past. Insights into the past are important for understanding the present, but do not easily translate into well-founded forecasts for the future. At the end of a volume exploring the experience of the gold standard peripheries, we are nevertheless tempted to say something on the present with possible bearings for the future. One reason for this is the timeless character of the objective under scrutiny. The scene-a world of global finance inhabited by sophisticated players and advanced instruments-might seem very different than a century ago. However, the ultimate objectives of monetary policy are much the same, to provide a stable currency and an efficient payments system. Central bankers and monetary authorities of today struggle with the same fundamental issues as their predecessors did before 1914: the maintenance of credibility, the challenges of adjustments and the desire for financial stability. Moreover, the asymmetry between core and periphery are still present: small economies continue to be regime takers with limited influence over the global regime.

Revista de Economia Política

The paper aims to establish interfaces between the Great Depression of the 1930s under the Gold Standard and the recent European Crisis under the Euro. It is argued that, despite their specificities, both crises revealed the potentially harmful effects, in economic and social terms, of institutional arrangements that considerably reduce the autonomy of monetary, fiscal and exchange rate policies of participating countries, without being accompanied by increased cooperation between them, which should be led by a global (in the case of the Great Depression) or regional (in the case of the European Crisis) hegemonic power, which is not only capable of, but is also willing to act as a buyer and lender of last resort, especially in circumstances characterized by increased uncertainty, the deterioration of the general state of expectations and increased liquidity preference. In fact, central European countries in the past and peripheral European countries nowadays were effectively pushed ...

Jens Adam et al., Europa dezentrieren. Frankfurt: Campus, 2019

The mistakes that led to the euro crisis are irreversible and fatal. The author was convinced in 2009/10, as were many commentators, that the euro would collapse under the weight of its contradictions. It did not because the European Central Bank, strongly supported by Germany, sacrificed the European economy to save the currency. Greece was crushed in 2015 pour encourager les autres. None of the basic problems have been addressed: the permanent deflationary bias, the German export surplus, the absence of appropriate fiscal institutions, political protection of French and German banks, the crippling division between North and South Europe. The truth is that national currencies were replaced by a single currency when the world was moving back to plural monetary instruments. There is no way that a single currency can meet the needs of over 300 million people living under such diverse circumstances. The crisis has been postponed, but not resolved. The Americans fought a civil war in order to unify their currency; the Europeans hoped that economic centralization would lead to political union. They got it the wrong way round. The paper reviews the specific history of the euro while drawing on critical commentary made by the author in 2002. This is not a financial crisis of credit and debt, but an episode in the history of money shaped by the collapse of national capitalism under pressure from a money circuit that is both global and lawless. The argument considers work by Smith, Polanyi, Mauss, Marx and Simmel and asks how money might be approached from a perspective of human economy.

The euro was expected to catalyse 'ever deeper union' among its member states. Instead, the euro has been captured by bad financial habits of old and has put the euro north and south in fierce neonationalist confrontation with each other. The currency union is now at the crossroads between either getting stuck in the mud of an ever deeper joint liability community bound to continual decline or a reset of the euro and realignment of the Eurosystem based on a return to the no-bailout rule and national responsibility for national debt.

2017

During 2016, "Akademska knjiga" from Novi Sad (edited by NUMMUS) published in the Serbian language this important work of the world-renowned economist J. Stiglitz. The scope of this monograph is over 380 pages, excellently structured in four special parts of equal volume, largely interdependent regarding treated issues (with a foreword, afterword and an index of terms and guidelines, as well as many bibliography items expressed in more than 200 footnotes, citations and explanations. The first part entitled "European crisis" (29-108) is very comprehensive because it introduces the reader into the issue of the crisis caused by earthquakes in the eurozone. It consists of three related, turbulent chapters: 1) The European crisis, 2) Euro expectations and reality, and 3) The sad effect of Europe. The author states that the global financial crisis of 2008 seamlessly turned into a European crisis. It is caused by events that present symptoms, not causes, of deeper problems in the eurozone structure: interest rates rose on government bonds of Greece and some other eurozone countries and some other countries could not get access to finance in any possible way. Although many factors contributed to the troubles of Europe, the basic error is only one: the creation of a common currency, the euro or more specifically, the creation of a common currency without creating a set of institutions that would enable authorities to the area as diverse as Europe to function effectively with one single currency. The second part entitled "The upside from the beginning" (109-202), also consists of three chapters: 1) Can a common currency succeed at all? 2) Euro: split system, 3) Monetary Policy and the European Central Bank; The second part of the book (from 4 to 6 chapter) reviews the necessary conditions for a successful monetary union, what Europe has actually done and how the discrepancy between what should have been done and what has been done has led to the failure of the euro, to the crisis that followed soon after its creation, and to a fork, where the rich get richer and the poor get poorer-which further complicates the success of a single currency system. The third part entitled "The wrong Policies" (203-266) consists of two chapters: 1) Crisis measures: how Troika politics deteriorated imperfect structure of the eurozone and guaranteed a depression, and 2) Structural reforms that deepened the failure; This part of the book (chapters 7 and 8), describe in detail how the eurozone reacted to the crisis and how those countries "came for help" with programs that actually deepened and prolonged the consequences. The fourth part entitled "What next?" (267-352), consists of four chapters: 1) Creation of a functional eurozone, 2) Is the amicable divorce possible?, 3) To flexible euro, 4) What next ... This part (9 to 12 chapter) explains what can be done to restore prosperity to Europe. A key hypothesis of this author is that the eurozone cannot survive because it was wrongly placed in the very beginning. Thus, he argues that the single currency in the region with enormous economic and political differences cannot easily succeed. In fact he argues that the single currency requires a fixed exchange rate between the member states and a uniform interest rate. Besides, the rules must be sufficiently

Bankarstvo, 2019

In January 1999, the euro was introduced as the common currency of the eurozone member states, which is used today by more than 340 million Europeans. By introducing the common currency, a monetary union has been created, which in its twenty years of existence has had its ups and downs. The biggest challenge so far has been the global financial crisis of 2008, with which most of the eurozone countries have successfully fought. Since its introduction, the euro has become the second most important currency, after the US dollar, in the structure of international reserves, contributing to the reduction of transaction costs in trade through the creation of a single market, but also facilitated the convergence of monetary policies of eurozone member countries. In the first twenty years of its existence, the euro has proven to be a relatively stable currency in which its holders have confidence. The European Central Bank, together with the central banks of the eurozone member countries, has created a monetary system that has confidence in the common currency by preserving its value and continuing work to achieve and ensure the eurozone's financial and price stability.

Choice Reviews Online, 2010

Chapter 1 The euro: the first decade and beyond marco buti, servaas deroose, ví tor gaspar and joã o nogueira martins 1 Part I Historical perspective 35 Chapter 2 A long-term perspective on the euro michael bordo and harold james 37 Chapter 3 Sui generis EMU barry eichengreen 72 Comment 1 Comment on Chapters 2 and 3 niels thygesen Part II OCA theory revisited Chapter 4 The OCA theory and the path to EMU francesco mongelli Chapter 5 A modern reconsideration of the OCA theory giancarlo corsetti Comment 2 Comment on Chapters 4 and 5

1998

The gold standard was a system of fixed exchange rates that offered little opportunity for carrying out monetary policies, short of suspending gold convertibility. Trade integration and capital mobility were very high. It is worthwhile asking whether there are useful lessons to draw for EMU from European experience during that period. One clear lesson is that debts matter. Another basic finding is that the stability of the European gold standard depended on the underlying price trend. Deflation prior to 1895 resulted in rising public debt burdens, which forced some countries to leave the system. Once gold was discovered and deflation

The European Journal of the History of Economic Thought, On line 21 July, 2021

With Jonas Ljungberg. In retrospect and erroneously the nineteenth century international gold standard was interpreted as a quest for monetary discipline. The discipline argument was introduced after WWI in support for a restoration of the gold standard. The interwar failure led to an emphasis on international balances, the argument which came to the fore in the preparations for the Bretton Woods system. The balance argument was central in the early discussions of monetary union in Europe, but with the criticism of Keynesianism the discipline argument became determinant in the design of the Economic and Monetary Union.

The Eurocrisis displays an astonishing similarity to the causes of the Great Depression in the form of massive current account imbalances, destabilising capital flows, financial fragility, and the commitment to defending a fixed exchange rate arrangement by means of austerity and internal devaluation. From the interwar economic and political disaster Europe eventually drew the lesson that internal balance had to enjoy priority over external balance, giving rise to a three-decade long period of unprecedented economic growth after the Second World War. As Europe has again stumbled into many of the policy errors that caused the Great Depression, it will need to relearn some of these lessons. In particular, the paper suggests that Europeanisation has gone too far and that rather than completing the monetary Union, Europe's prosperity and political stability would be better served by compartmentalisation of financial markets, vertical industrial policies and an escape clause in the common currency allowing for temporary exit in case of fundamental disequilibria.