The Future of the Euro

The Future of the Euro

The Future of the Euro

The Future of the Euro

Synopsis

In The Future of the Euro, a group of the world's top political economists analyze the fundamental causes of the euro crisis, determine how it can be fixed, and consider what likely futures lie ahead for the currency. The book makes three interrelated arguments emphasizing the primacy of political over economic factors. First, the original plan for the euro focused on monetary union, but omitted a financial and banking union, mutually supporting institutions of fiscal union and economic government, and a legitimate political union. Second, the euro's unfinished design led to economic divergence-quietly altering the existing distribution of economic and political power within Europe prior to the crisis-which in turn determined the EU's crisis response. The book highlights how the euro's four most important member states - Germany, France, Italy and Spain - each changed once they adopted the euro, why the crisis affected them so differently, and how each has since struggled to live with the commitments the euro necessitates. Third, the book examines three possible "euro futures" through the lens of the politics of its reluctant leader Germany; through the lens of the EU's capacity to move forward through crises; and through the geopolitical lens of the international monetary system. Any successful long-term solution to the euro's predicament will need to start with the political foundations of markets.

Excerpt

One of the more minor consequences of the 2007–2008 global financial crisis was some serious soul searching among economists and political scientists for having failed to predict these events. Given its “black swan” nature— low probability and high impact—we might all be forgiven. However, the European sovereign debt crisis that followed two years later invites no such sympathy. There is neither ambiguity about its nature nor its timing, only its final resolution.

The European sovereign debt crisis was in many ways the inevitable consequence of the US financial crisis reaching European shores. But why then, if it was inevitable, were policymakers so blindsided? The euro crisis has called into question the long-term viability of Europe’s Economic and Monetary Union. In order to better understand what has gone wrong, how the Eurozone could potentially be fixed, and what the future(s) of the euro might be, including its possible failure, this volume brings together the insights of a dozen scholars on the political economy of Europe, from both Europe and the United States.

This volume is organized according to the various contributors’ scholarly expertise and research interests. While a division of labor is a core characteristic of edited volumes, this volume is unique in two respects. First of all, the chapters actually agree to a considerable extent on the main features of the euro and its crisis. Second, they directly engage with and build upon one another. As a result, the whole of the book is much greater than the sum of its parts. We hope that you, the reader, agree with this assessment.

There are many people we would like to thank who have been involved with this project, and we apologize in advance if we omit to mention them here. First of all, this book would not have been possible without the generous funding made available by the Bernard L. Schwartz Globalization Initiative at the School of Advanced International Studies (SAIS) at Johns . . .

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