Any Future of the Euro?

Abstract

The EMU in its present form has come to a dead end. Stagnation, high unemployment and huge balance-of-payments surpluses cannot go on. Macroeconomic imbalances and popular discontent accumulate. If a future dissolution similar to the Gold Standard in the1930s should be avoided, a much needed Solidarity Fond has to be set-up. Countries with balance-of-payments surplus above 3 percent and foreign wealth beyond 60 percent of GDP should deposit the excess without interest. The revenue could be used to improve productivity in backward regions of deficit countries. In addition, public finances should no longer be a EU concern, but left to the national governments to decide upon. According to many Euro-realists, the EMU was – and still is – much too prematurely established. The Euro could be kept only as a parallel currency valued as a weighted average of all EU national currencies somewhat similar to the ECU, which worked quite well before the EMU was established.