Int. J. of Monetary Economics and Finance   »   2012 Vol.5, No.2

 

 

Title: Repairing the original sin of the European Monetary Union

 

Authors: Sergio Rossi; Bernard Dafflon

 

Addresses:
Department of Economics, University of Fribourg, Boulevard de Pérolles 90, CH-1700 Fribourg, Switzerland
Department of Economics, University of Fribourg, Boulevard de Pérolles 90, CH-1700 Fribourg, Switzerland

 

Abstract: This study shows that the origins of the sovereign debt crisis within the euro area are to be found within the private sector and in economic policy mistakes rather than only in the profligacy of some national governments in the Southern periphery of Euroland. Sovereign debtors and their private creditors should therefore meet in order for them to arrange a financial package including debt restructuring, rescheduling and cancellation. In this study we argue in favour of a European political union in the form of a federation of states, with its own taxation powers and some financial equalisation transfer mechanisms, to be coupled with a proactive investment policy carried out by the European Investment Bank (EIB) and the issue of euro-bonds to channel global savings into an investment-led European Economic Recovery Plan.

 

Keywords: Euro area; Eurozone; fiscal policy; political union; sovereign debt crisis; stability and growth pact; Economic and Monetary Union; EMU; European Union; EU; private sector; economic policy; debt cancellation; debt rescheduling; debt restructuring.

 

DOI: 10.1504/IJMEF.2012.048731

 

Int. J. of Monetary Economics and Finance, 2012 Vol.5, No.2, pp.102 - 123

 

Available online: 28 Aug 2012

 

 

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