Abstract
This chapter presents a structural–monetary reform to transform the euro into a factor of European integration rather than representing a straightjacket for member countries that are suffering from the crisis without any likelihood to resolve it. This requires transforming the European Central Bank to make it become a settlement institution for those national central banks that participate in the TARGET2 system, enabling those member countries that are suffering most from the crisis to reintroduce their own national currencies for their domestic payments. This will transform the euro into a truly international currency, thereby providing for both an orderly working euro-area payments system and the possibility to steer domestic interest rates policy with the aim of contributing to economic as well as financial stability. Such a structural–monetary reform will be instrumental in enhancing at both economic and institutional level the integration of euro-area countries, with a view to do justice to the original project of European union.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
According to article 3, paragraph 3, of the TEU, the European Union (EU, including the EMU) “shall promote economic, social and territorial cohesion, and solidarity among Member States”.
- 2.
EU15 refers to the 15 member countries of the EU before the EU enlargement in 2004. It includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
- 3.
“The typical modern banking system consists of a sun, namely the central bank, and planets, which, following American usage, it is convenient to call the member banks” (Keynes 1930/1971, 8).
- 4.
The “Interlinking account” is an account that each NCB holds within the Interlinking mechanism, which designates “the infrastructures and procedures which link domestic RTGS systems in order to enable the processing of inter-Member State payments within TARGET[2]” (European Central Bank 2011, 58).
- 5.
Note in passing that the large majority of economists, politicians, journalists, and central bankers do not distinguish, conceptually, a single currency from a common currency, using these two expressions as if they were synonymous. The mistake in this regard is plain, if one considers the famous analogy between ‘money’ and ‘language’ (see Tobin 1992). If English is our common language in this chapter, this is not our single language, as each of us can speak different languages, say French and Portuguese, particularly with one’s own friends and family.
- 6.
Natural candidates for such pan-European taxes would be bank-based financial transactions and uses of non-renewable resources across the euro area (see Rossi 2012b).
- 7.
Various authors have proposed different types of eurobonds, called eurobills, blue bonds, red bonds, or stability bonds. See Claessens et al. (2012) for a summary and an assessment of these (and other types of) eurobonds.
References
Andor L (2014) Labour mobility in the EU: challenges and perspectives for a genuine European labour market, lecture at the European University Institute, Florence, 24 June, available at http://europa.eu/rapid/press-release_SPEECH-14-491_en.htm
Barslund M, Busse M, Schwarzwälder J (2015) Labour mobility in Europe: an untapped ressource? Centre for European Policy Studies Policy Brief, No. 327
Bibow J (2016) Making the euro viable: the Euro treasury plan. Eur J Econ Econ Policies: Interv 13(1):72–86
Board of Governors of the Federal Reserve System (2014) Federal Reserve Act. Federal Reserve System, Washington, DC, available at http://www.federalreserve.gov/aboutthefed/fract.htm
Buiter WH, Corsetti G, Roubini N (1993) Excessive deficits: sense and nonsense in the Treaty of Maastricht. Econ Policy 8(16):58–100
Buiter WH, Rahbari E, Michels J (2011) The implications of intra-euro area imbalances in credit flows. Centre for Economic Policy Research Policy Insight, No. 57
Claessens S, Mody A, Vallée S (2012) Paths to eurobonds. International Monetary Fund Working Paper, No. WP/12/172
Dahrendorf R (1997) Perché l’Europa? Riflessioni di un europeista scettico. Laterza, Rome
De Grauwe P, Ji Y (2012) What Germany should fear most is its own fear: an analysis of Target2 and current account imbalances. Centre for European Policy Studies Working Document, No. 368
Draghi M (2014) Stability and prosperity in monetary union, speech at the University of Helsinki, 27 November, available at https://www.ecb.europa.eu/press/key/date/2014/html/sp141127_1.en.html
Échinard Y (ed) (1999) La zone euro et les enjeux de la politique budgétaire: une monnaie, onze budgets…. Presses Universitaires de Grenoble, Grenoble
European Central Bank (2007) Payment and securities settlement systems in the European Union, Volume 1: Euro Area Countries. European Central Bank, Frankfurt
European Central Bank (2011) TARGET annual report 2010. European Central Bank, Frankfurt
Feldstein M (2000) Europe can’t handle the euro. Wall Street J, 8 February, available at http://www.nber.org/feldstein/wj020800.html
Frankel J, Rose A (2002) An estimate of the effect of common currencies on trade and income. Q J Econ 117(2):437–466
Goodhart CAE (1989) Money, information and uncertainty, 2nd edn. Macmillan, London (first published 1975)
Hankel W, Nölling W, Schachtschneider KA, Starbatty J (2001) Die Euro-Illusion: Ist Europa noch zu retten? Rowohlt-Taschenbuch-Verlag, Reinbek
Holland S (2010) Financial crises, governance and cohesion: can governments learn up? In: Richardson J (ed) From recession to renewal: the impact of financial crises on public services and local government. Policy Press, Bristol, pp 50–68
Kenen PB (1969) The theory of optimum currency areas: an eclectic view. In: Mundell RA, Swoboda AK (eds) Monetary problems of the international economy. University of Chicago Press, Chicago, pp 41–60
Keynes JM (1930/1971) A treatise on money (vol. I The pure theory of money). Macmillan, London (Reprinted in The Collected Writings of John Maynard Keynes, Vol. V, Macmillan, London)
Krugman P (2011) One size fits one, redux (wonkish). NY Times, 15 June, available at http://krugman.blogs.nytimes.com/2011/06/15/one-size-fits-one-redux-wonkish/?_r=0
Lee J, Crowley PM (2009) Evaluating the stresses from ECB monetary policy in the euro area. Bank of Finland Discussion Paper, No. 11
Machlup F (1963) Reform of the international monetary system. In: Grubel HG (ed) World monetary reform: plans and issues. Stanford University Press/Oxford University Press, Stanford/London, pp 253–260
McKinnon RI (1963) Optimum currency areas. Am Econ Rev 53(4):717–725
Mundell RA (1961) A theory of optimum currency areas. Am Econ Rev 51(4):657–665
Pasinetti LL (1998) The myth (or folly) of the 3 % deficit/GDP Maastricht ‘parameter’. Camb J Econ 22(1):103–116
Pisani-Ferry J (2014) The euro crisis and its aftermath. Oxford University Press, Oxford
Rossi S (1997) Modalités d’institution et de fonctionnement d’une banque centrale supranationale: le cas de la Banque Centrale Européenne. Peter Lang, Paris
Rossi S (2007) Money and payments in theory and practice. Routledge, London
Rossi S (2012a) The monetary–structural origin of TARGET2 imbalances across Euroland. In: Gnos C, Rossi S (eds) Modern monetary macroeconomics: a new paradigm for economic policy. Edward Elgar, Cheltenham, pp 221–238
Rossi S (2012b) Replacing recession and austerity with growth and solidarity across Euroland. In: Méaulle M (ed) Austerity is not the solution! Contributions to European economic policy. FEPS, Brussels, pp 33–40
Rossi S (2013) Financialization and monetary union in Europe: the monetary–structural causes of the euro-area crisis. Camb J Reg Econ Soc 6(3):381–400
Rossi S (2015) The euro-area crisis: structural origins and possible exit strategies. In: Bitzenis A, Karagiannis N, Marangos J (eds) Europe in crisis: problems, challenges, and alternative perspectives. Palgrave Macmillan, Basingstoke, pp 143–154
Rossi S, Dafflon B (2012) Repairing the original sin of the European Monetary Union. Int J Monet Econ Financ 5(2):102–123
Sinn H-W, Wollmershäuser T (2012) Target loans, current account balances and capital flows: the ECB’s rescue facility. Int Tax Public Financ 19(4):468–508
Tobin J (1992) Money. In: Newman P, Milgate M, Eatwell J (eds) The new Palgrave dictionary of money and finance, vol 2. Palgrave, London, pp 770–779
Westermann F (2012) Two types of capital flight: will a common deposit insurance help to stabilise the TARGET2 imbalances? In: Beck T (ed) Banking Union for Europe: risks and challenges. Centre for Economic Policy Research, London, pp 57–64
Wyplosz C (1991) Monetary union and fiscal policy discipline. In: Commission of the European Communities (ed) The economics of EMU: special edition of “European Economy”. Office for official publications of the European Communities, Luxembourg, pp 165–184
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2017 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Rossi, S. (2017). A Structural-Reform Proposal for a Two-Speed European Monetary Union. In: da Costa Cabral, N., Gonçalves, J., Cunha Rodrigues, N. (eds) The Euro and the Crisis. Financial and Monetary Policy Studies, vol 43. Springer, Cham. https://doi.org/10.1007/978-3-319-45710-9_4
Download citation
DOI: https://doi.org/10.1007/978-3-319-45710-9_4
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-45709-3
Online ISBN: 978-3-319-45710-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)