This book presents a new narrative on the eurozone crisis. It argues that the common currency has the potential to kill the European Union, and the conventional wisdom that the eurozone can be fixed by a common budget and further political integration is incorrect.
The authors address key questions such as why the European Union and the single market have been successful, why the common currency poses a threat to European integration, and whether it is possible to either fix the Eurozone or dissolve it while keeping the EU and the single market. Contrary to the view that it would be best if the Southern European countries left the eurozone first, the book makes the case that the optimal solution would be to start the process with the most competitive countries exiting first. The authors argue that a return to national currencies would be beneficial not only to the crisis-ridden southern countries, but also to France and Germany, which were the main promoters of the single currency. An organised unwinding of the euro area would be beneficial both for the European economy and for Europe's main trading partners.
The authors contend that to defend the euro at all costs weakens the European economy and threatens the cohesion of the European Union. If pro-European and pro-market EU leaders do not dismantle the eurozone, it will most likely be done by their anti-European and anti-market successors. If that happens, the European Union and the common market will be destroyed.
This book will be a useful and engaging contribution to the existing literature in the fields of macro, monetary and international finance and economics.
Introduction & Overview Part I. From the success of the European Union and the Single Market to the euro crisis Chapter 1. The European Union and the Single Market: Europe’s great success Chapter 2. The euro as an intended step towards strengthening the EU and the Single Market Chapter 3. The eurozone at a crossroads Part II. The significance of national currencies and exchange rate adjustments Chapter 4. Loss of international competitiveness and inability to restore it as a source of the problems of the eurozone’s depressed economies Chapter 5. International competitiveness should not be confused with productivity Chapter 6. Currency weakening and deflationary policy: two alternative scenarios for restoring international competitiveness Chapter 7. The meaning of exchange rate adjustments (bike trip example) Chapter 8. The tragic experience of the defence of the gold standard through deflationary policy during the Great Depression Chapter 9. Devaluation as a key element of successful adjustment programmes in the post-war period Chapter 10. The cases often presented as the evidence of effectiveness of the internal devaluation Chapter 11. Controversies surrounding devaluation Part III. Can Europe compensate for the lack of national currencies? Chapter 12. The search for solutions that will repair and strengthen the Eurozone Chapter 13. Can fiscal union deliver the tools to improve threatened countries’ competitiveness? Chapter 14. What could a more flexible labour market deliver? Chapter 15. Can a fiscal union protect eurozone members from future problems with competitiveness? Chapter 16. The US, nation states and underdeveloped regions, and the ability of a single currency to function in Europe Chapter 17. The optimum community level for a single currency Part IV. What are the consequences of defending the Euro at all costs? Chapter 18. The threat to European integration Chapter 19. Conflicts with trading partners Part V. How to return to national currencies, while preserving the European Union and Single Market? Chapter 20. The euro trap Chapter 21. The way out of the euro trap: Germany should leave first Chapter 22. The main elements of the strategy for a coordinated euro break-up Chapter 23. Impact of the proposed strategy on risks associated with segmentation of the Eurozone Chapter 24. The special role of the ECB during the transition period Chapter 25. The ability to cope with banking and debt crises Chapter 26. A new currency coordination system in Europe Chapter 27. Europe avoids conflicts with trading partners; Germany avoids a hard landing Chapter 28. Who can initiate the dissolution of the eurozone? Chapter 29. A new Bretton Woods Conclusion Appendix: The European Solidarity Manifesto