Macroeconomic asymmetry and imbalances in the euro zone

Catherine Sifakis-Kapetanakis (1)

1 CREG - Centre de recherche en économie de Grenoble

The recent sovereign debt crisis in Europe, now a Eurozone crisis, has prompted a growing awareness of the disparities in the economic conditions and competitive positions of Eurozone countries. Such disparities are reflected in the accumulation of imbalances to the disadvantage of countries in Southern Europe, with the Eurozone tending to split into two groups, north and south. The present study explores the impact of Europe's existing institutional framework on the degree of macroeconomic disparity in the Eurozone. It draws on analysis of the costs and benefits of this framework, and how they are distributed geographically. There is a fundamental difference between the economic advantages of European economic and monetary union, and the costs and risks associated with the system set up to promote union. Many of the benefits of economic and monetary union will only really be felt in the medium or even long term. In contrast the impact of the costs incurred by EMU operation is increasingly apparent - and more so as time passes - mainly penalizing the least developed European countries. The thrust of this study is that in its current form the EMU's institutional framework is not viable. It encourages the accumulation of lasting imbalances at the expense of Europe's least developed nations. While giving rise to substantial costs and risks for these countries, it jeopardizes the institutions and mechanisms which would enable them to cope. An increasingly global market - to which the Treaty on the Single European Act contributed - reveals and accentuates the Community's structural imbalance. The growing imbalance fuelled by the way the Eurozone currently operates is undermining the EMU itself. It is also exacerbating tension between member states and the growing disaffection of public opinion with regard to the single currency. To maintain consistent operation of the EMU, the burden of these costs and risks must be shouldered collectively, through the coordination and centralization of economic policies and the development of budgetary federalism. But such conditions are extremely difficult to achieve and involve significant costs - some monetary, others not - borne by the most prosperous countries in the European Union. These costs give rise to an uncooperative attitude, compromising the EMU as a viable system. One solution which merits consideration would be a reappraisal - on a negotiated and collectively approved basis - of certain aspects of Europe's existing institutional framework.

Mots clés: monetary policy; European Union; euro; institution; politique monétaire; union européenne

Domaines: Economies et finances

Catherine Sifakis-Kapetanakis. Macroeconomic asymmetry and imbalances in the euro zone. 15th conference of the research network macroeconomics and macroeconomic policies "From crisis to growth ? The challenge of imbalances, debt, and limited resources", Macroeconomic policy institute, Research network macroeconomics and macroeconomic policies, Oct 2011, Berlin, Germany. ⟨halshs-00905369⟩