I thought you might be interested in my recent NBER working paper on the
problems of the Eurozone. A shorter version will appear in the
next issue of Foreign Affairs
The Working Paper is available at http://www.nber.org/papers/w17617.pdf
Here is the abstract:
The Euro and European Economic Conditions
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(135 K)
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Martin S. Feldstein <http://www.nber.org/people/martin_feldstein>
*NBER Working Paper No. 17617*
*Issued in November 2011*
*NBER Program(s): EFG <http://www.nber.org/papersbyprog/EFG.html>
IFM<http://www.nber.org/papersbyprog/IFM.html>
ME <http://www.nber.org/papersbyprog/ME.html>*
The creation of the euro should now be recognized as an experiment that has
led to the sovereign debt crisis in several countries, the fragile
condition of major European banks, the high levels of unemployment, and the
large trade deficits that now exist in most Eurozone countries. Although
the European Central Bank managed the euro in a way that achieved a low
rate of inflation, other countries both in Europe and elsewhere have also
had a decade of low inflation without incurring the costs of a monetary
union.
The emergence of these problems just a dozen years after the start of the
euro in 1999 was not an accident or the result of bureaucratic
mismanagement but the inevitable consequence of imposing a single currency
on a very heterogeneous group of countries, a heterogeneity that includes
not only economic structures but also fiscal traditions and social
attitudes.
This paper reviews (1) the reasons for these economic problems, (2) the
political origins of the European Monetary Union, (3) the current attempts
to solve the sovereign debt problem, (4) the long-term problem of
inter-country differences of productivity growth and competitiveness, (5)
the special problems of Greece and Italy, (6) and the pros and cons of a
Greek departure from the Eurozone.
This paper is available as PDF (135 K)<http://www.nber.org/papers/w17617.pdf>
or via email <http://www.nber.org/papers/mail/w17617>.
**
Marty Feldstein
Received on Sat Nov 26 2011 - 19:16:23 EST
