The Euro and European Economic Conditions

17 Pages Posted: 24 Nov 2011 Last revised: 30 Nov 2011

See all articles by Martin S. Feldstein

Martin S. Feldstein

National Bureau of Economic Research (NBER) (deceased); Harvard University (deceased)

Date Written: November 2011

Abstract

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.

Suggested Citation

Feldstein, Martin S., The Euro and European Economic Conditions (November 2011). NBER Working Paper No. w17617, Available at SSRN: https://ssrn.com/abstract=1964162

Martin S. Feldstein (Contact Author)

National Bureau of Economic Research (NBER) (deceased)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3905 (Phone)
617-868-7194 (Fax)

Harvard University (deceased)

Littauer Center
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-495-2167 (Phone)
617-496-5444 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
136
Abstract Views
754
rank
233,407
PlumX Metrics