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Is the Eurozone Rescue Strategy Tantamount to the Rearrangement of the Deckchairs on the Titanic?

Journal of Economic Integration, Vol. 27, No. 1, pp. 33-79, 2012

47 Pages Posted: 21 Mar 2012  

Miroslav N. Jovanovic

University of Geneva, Global Studies Institute

Date Written: March 21, 2012

Abstract

The eurozone is the crown jewel in the process of European integration. This monetary zone includes the most advanced integration grouping of countries in the European Union. The eurozone has been expanding the number of its participants, a sign of success in any economic or political union. Politicians promised citizens stability and perpetual economic progress at the time of the eurozone inauguration (1999). This monetary integration has been a predominantly political process which neglected certain economic fundamentals for long term durability. These include federal-type intra-group fund transfers and orientation towards economic growth. Certain eurozone flaws appeared, raising powerful doubts about its survival. Some of the internal troubles of the eurozone such as an endemic lack of respect of rules, were amplified by the global credit crunch, bringing into question the initial promises made to citizens. A series of rescue operations commenced in 2010. Too much political and economic capital has been invested in the eurozone, to the extent that its statesmen will do everything they can to rescue it. If its participants believe the deal to be beneficial, the eurozone will continue its existence, but several federal-type amendments are necessary. Otherwise, the eurozone may join the ranks of a series of European monetary zones that have disintegrated over the past two centuries. The bloc’s citizens (and others) are unwitting observers of a slow motion eurozone train crash. Even though the eurozone burdens some of its member countries with high costs, its break-up or countries’ departure from it may prove even worse, but not inconceivable.

Keywords: EMU, eurozone, rescue, bailout, break up, deficit, debt, bond, Germany, France, Greece

JEL Classification: F31, F33, F36

Suggested Citation

Jovanovic, Miroslav N., Is the Eurozone Rescue Strategy Tantamount to the Rearrangement of the Deckchairs on the Titanic? (March 21, 2012). Journal of Economic Integration, Vol. 27, No. 1, pp. 33-79, 2012. Available at SSRN: https://ssrn.com/abstract=2026854

Miroslav N. Jovanovic (Contact Author)

University of Geneva, Global Studies Institute ( email )

Sciences II, 30 Quai Ernest-Ansermet
Geneva 4, 1211
Switzerland
+41 22 379 3706 (Phone)

HOME PAGE: http://www.miroslavjovanovic.com

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