Edited by Jesper Jespersen and Mogens Ove Madsen
Chapter 11: Nothing learned from the crisis? Some remarks on the stability programmes 2011–2014 of the Euro area governments
The economic crisis in the Euro area continues to galvanize its member states’ governments in 2011. In particular, Greece and increasingly other countries in the so-called periphery of the monetary union are facing the threat of defaulting on their debt. Over and above the pressing default problem, which is exacerbated by the lack of country-level exchange rate flexibility and monetary policy, Euro area governments need to achieve the longer-term macroeconomic stability required for a functioning monetary union. This stability, which includes the reduction of external imbalances, is widely recognized as essential for the Euro area to achieve robust growth. Without growth it is feared that unemployment cannot be reduced, foreboding more social unrest and possibly threatening the very project of European integration. In striving for stability, Euro area governments therefore face two challenges: the reduction of public deficits, and the reduction of external imbalances. However, while the public deficits have been in the limelight ever since the inception of the monetary union, the focus on external imbalances has been meagre. While the present crisis has finally alerted some European policy-makers, the governments still largely ignore the importance of reducing current account imbalances in a coordinated manner.
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