The Eurocrisis: Muddling Through, or on the Way to a More Perfect Euro Union?

15 Pages Posted: 23 Jun 2014

See all articles by Joshua Aizenman

Joshua Aizenman

University of Southern California - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: June 2014

Abstract

This paper looks at the short history of the Eurozone through the lens of an evolutionary approach to forming new institutions. The euro has operated as a currency without a state, under the dominance of Germany. This has so far allowed the euro to achieve a number of design objectives, and this may continue, as long as Germany does not shirk its growing responsibility for the euro's future. Germany's resilience and dominant size within the EU may explain its "muddling-through" approach towards the Eurozone crisis. We review several manifestations of this muddling through process. Greater mobility of labor and lower mobility of under-regulated capital may be the costly "second best" adjustment until the arrival of more mature institutions in the Eurozone.

Suggested Citation

Aizenman, Joshua, The Eurocrisis: Muddling Through, or on the Way to a More Perfect Euro Union? (June 2014). NBER Working Paper No. w20242. Available at SSRN: https://ssrn.com/abstract=2457717

Joshua Aizenman (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall, 300
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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