Monetary Subordination in the Eurozone: Pillars and Asymmetries

Abstract

This paper explores the existence of monetary subordination in the Eurozone as a development on the Core-Periphery approaches developed in the midst of the Eurocrisis. The analysis establishes the existence of monetary subordination in the EMU as the foundation for --financial-- subordination at large. Monetary subordination in the EMU is found to be supported via three pillars: the hierarchy of euro moneylike balances, the nature of the euro as 'hybrid money' and the fragmentation of the monetary jurisdictions coupled with their selective integration. To analyse the effects of monetary subordination, the paper then focuses on subordinate financial development and the Eurozone crisis as results of the subordination described coupled with deleveraging, thus highlighting the asymmetric effects of the latter on subordinate and non-subordinate members. In doing so, the paper provides a new lens in the tradition of Imperialism to analyse the economic trajectories of members of monetary unions bounded by asymmetric relations as well as to understand more thoroughly the catalytic role of money and finance for Subordination.

Keywords: Financial Subordination, Monetary Union, Eurozone, Currency Hierarchy, Monetary Systems, Monetary Architecture, EMU, Europe

JEL Classification: E42, F33, F45