Making the Euro Whole

Besides the lack of a common treasury, the euro suffers from other shortcomings, which the authorities do not seem to have fully understood. Indeed, the authorities are committing at least two mistakes that, if not remedied, will condemn Europe to a bleak future.

NEW YORK – The architects of the euro knew that it was incomplete when they designed it. The euro had a common central bank but no common treasury. This was unavoidable, because the Maastricht Treaty was meant to bring about a monetary union without a political union.

European authorities were confident, however, that if and when the euro ran into a crisis, they would be able to overcome it. After all, that is how the European Union was created, taking one step at a time, knowing full well that additional steps would be required.

With hindsight, one can identify other deficiencies in the euro of which its architects were unaware. The euro was supposed to bring about economic convergence, but it produced divergences instead, because its architects did not realize that imbalances may emerge not only in the public sector, but in the private sector as well.

To continue reading, please log in or enter your email address.

To read this article from our archive, please log in or register now. After entering your email, you'll have access to two free articles every month. For unlimited access to Project Syndicate, subscribe now.

required

By proceeding, you agree to our Terms of Service and Privacy Policy, which describes the personal data we collect and how we use it.

Log in

http://prosyn.org/EwQuEb6;

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.