Failing Institutions Are at the Core of the Euro Crisis

36 Pages Posted: 23 Oct 2012

See all articles by Alojzy Z. Nowak

Alojzy Z. Nowak

University of Warsaw

Yochanan Shachmurove

City University of New York, CUNY City College of New York - Department of Economics; The University of Pennsylvania - Department of Economics

Date Written: October 22, 2012

Abstract

The European Union was created to promote economic, cultural, and regional prosperity. However, the Global Financial Crisis demonstrates that its economic institutions are flawed. While each sovereign state in the Eurozone forfeits the control of its money supply, the lack of a common fiscal institution allows individual countries to pursue their own political and financial agendas. The on-going economic hardship emphasizes the critical role of economic and political institution ions. This paper analyzes both beneficial and perverse incentives of joining the European Union, discusses the consequences of deficient economic institutions and provides potential solutions towards the alleviation of the crisis.

Keywords: European Union, Eurozone, Harmonized Index of Consumer Prices, Portugal, Ireland, Greece and Spain (PIGS), Fiscal Union, Financial Crises, Maastricht Criteria, Maastricht Treaty, Exchange Rate, Euro

JEL Classification: B52, F00, F01, F33, K0

Suggested Citation

Nowak, Alojzy Z. and Shachmurove, Yochanan, Failing Institutions Are at the Core of the Euro Crisis (October 22, 2012). PIER Working Paper No. 12-041, Available at SSRN: https://ssrn.com/abstract=2165343 or http://dx.doi.org/10.2139/ssrn.2165343

Alojzy Z. Nowak

University of Warsaw ( email )

Krakowskie Przedmiescie 26/28
Warszawa, Pl-00681
Poland

Yochanan Shachmurove (Contact Author)

City University of New York, CUNY City College of New York - Department of Economics ( email )

160 Convent Avenue
New York, NY 10031
United States
212-650-6202 (Phone)

The University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-1090 (Phone)
215-573-2057 (Fax)

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