The Euro

The Euro

Evolution and Prospects

Philip Arestis, Andrew Brown and Malcolm Sawyer

The authors offer a sustained argument that the single currency as currently implemented does not promise to deliver prolonged growth. They contend that the economic impact of the euro, and its accompanying institutions, is likely to be destabilising and deflationary; that the political impact is profoundly undemocratic and that the social consequences are likely to be deleterious. They do not reject the concept of a single currency but are highly critical of policy arrangements such as the Stability and Growth Pact which govern the euro. The authors propose alternative policy and institutional arrangements within which the euro should be embedded. They demonstrate that these would have the benefits of a single currency whilst avoiding many of the potential costs identified by detractors.

Chapter 1: Introduction

Philip Arestis, Andrew Brown and Malcolm Sawyer

Subjects: economics and finance, money and banking, post-keynesian economics

Extract

Economic and Monetary Union constitutes a profound change in the economic, social and political spheres of Europe. Inevitably, it has been the subject of intense debate. The single currency, launched in January 1999, has served to concentrate many diverse aspects of the debate around one question: is the euro in the interests of Europe? This book presents a sustained argument that the single currency as currently implemented does not promise to deliver enduring economic growth in the European Union. We argue that the economic impact of the euro and its accompanying institutions, the European Central Bank and the Eurosystem, is likely to be deflationary and destabilising; that the political impact is profoundly undemocratic; and that the social consequences are likely to be deleterious. We do not, however, argue that the project of a single European currency is inherently flawed. On the contrary, we propose a Keynesian alternative to the economic policies and institutions that currently surround the euro. In this way, we argue that the broad question is not whether to be ‘for’ or ‘against’ the euro per se, as if there were no alternative to the monetarist structures underpinning the euro outside of its abolition. The Keynesian alternative we propose can provide many of the benefits of the single currency as recognised by its proponents, whilst avoiding many of the costs identified by its detractors. Chapter 2 sets the inception of the euro in the context of the postwar history of the attempts to forge economic and monetary union...