Doomed to Failure?webfac/eichengreen/e183_sp07/183_mar20_sp07.pdfEuropean Atomic Energy Community is...
Transcript of Doomed to Failure?webfac/eichengreen/e183_sp07/183_mar20_sp07.pdfEuropean Atomic Energy Community is...
Doo
med
to
Failu
re?
By R
emy
Piw
owar
ski &
Eth
an L
utsk
e
Ove
rvie
wO
verv
iew
Wha
t is t
he E
urop
ean
Uni
on?
Wha
t is t
he E
urop
ean
Uni
on?
Hist
ory
of th
e E
urop
ean
Inte
grat
ion
Hist
ory
of th
e E
urop
ean
Inte
grat
ion
Brus
sels
Brus
sels --
Fran
kfur
t Con
sens
us v
s. Fr
ankf
urt C
onse
nsus
vs.
Mun
del
Mun
del
Qua
ntita
tive
Dat
aQ
uant
itativ
e D
ata
The
Futu
re o
f Eur
o (p
ossib
le b
reak
The
Futu
re o
f Eur
o (p
ossib
le b
reak
-- up?
)up
?)E
uro
and
Cent
ral
Eur
o an
d Ce
ntra
l -- Eas
tern
Eur
ope
Eas
tern
Eur
ope
Tw
o po
ints
:T
wo
poin
ts:
Disc
ussio
n af
ter e
very
issu
eD
iscus
sion
afte
r eve
ry is
sue
Feel
free
to a
sk q
uest
ions
!Fe
el fr
ee to
ask
que
stio
ns!
Let
Let ’’ s
star
t!s s
tart!
Thi
s is E
urop
eT
his i
s Eur
ope ……
Apol
ogie
sAp
olog
ies ……
Thi
s is E
urop
eT
his i
s Eur
ope ……
Eur
ope
is n
ot th
e E
U, t
houg
h…
Wha
t is t
he E
U?
Wha
t is t
he E
U?
An
inte
rnat
iona
l org
aniz
atio
n w
ith n
o eq
uiva
lent
in h
istor
y or
iA
n in
tern
atio
nal o
rgan
izat
ion
with
no
equi
vale
nt in
hist
ory
or i n
the
mod
ern
n th
e m
oder
n w
orld
.w
orld
.
Eur
opea
n In
tegr
atio
n in
a N
utsh
ell
Eur
opea
n In
tegr
atio
n in
a N
utsh
ell
9 M
ay 1
950
9 M
ay 1
950
––Ro
bert
Schu
man
n pr
opos
es th
e es
tabl
ishm
ent o
f a E
urop
ean
Stee
l Ro
bert
Schu
man
n pr
opos
es th
e es
tabl
ishm
ent o
f a E
urop
ean
Stee
l and
an
d Co
al Co
mm
unity
Coal
Com
mun
ity(( B
elgiu
m, t
he F
eder
al Re
publ
ic of
Ger
man
y, Fr
ance
, Ita
ly,
Belg
ium
, the
Fed
eral
Repu
blic
of G
erm
any,
Fran
ce, I
taly,
Lu
xem
bour
g an
d th
e N
ethe
rland
s as m
embe
rs).
Luxe
mbo
urg
and
the
Net
herla
nds a
s mem
bers
). 25
Mar
ch 1
957
25 M
arch
195
7 E
urop
ean
Eco
nom
ic C
omm
unity
is fo
rmed
. E
urop
ean
Eco
nom
ic C
omm
unity
is fo
rmed
. (c
usto
ms d
utie
s bet
wee
n th
e six
cou
ntrie
s are
abo
lishe
d on
1 Ju
l(c
usto
ms d
utie
s bet
wee
n th
e six
cou
ntrie
s are
abo
lishe
d on
1 Ju
l y 1
968)
y 19
68)
1957
19
57 --
The
The
Eur
opea
n At
omic
Ene
rgy
Com
mun
ityE
urop
ean
Atom
ic E
nerg
y C
omm
unity
is cr
eate
dis
crea
ted
1973
19
73 --
Den
mar
k, Ir
eland
and
the
Uni
ted
Kin
gdom
join
the
Com
mun
ity..
Den
mar
k, Ir
eland
and
the
Uni
ted
Kin
gdom
join
the
Com
mun
ity..
June
197
9 Ju
ne 1
979
-- the
th
e fir
st e
lect
ions
to th
e E
urop
ean
Parli
amen
tfir
st e
lect
ions
to th
e E
urop
ean
Parli
amen
t19
80s
1980
s ––
Gre
ece
(198
1)G
reec
e (1
981)
, , Sp
ain
and
Portu
gal
Spai
n an
d Po
rtuga
l (bo
th: 1
986)
join
the
Eur
opea
n (b
oth:
198
6) jo
in th
e E
urop
ean
Com
mun
ity..
Com
mun
ity..
1992
1992
––M
aast
richt
Tre
aty
form
s the
Eur
opea
n U
nion
.M
aast
richt
Tre
aty
form
s the
Eur
opea
n U
nion
.19
95
1995
--A
ustri
a, Fi
nlan
d an
d Sw
eden
join
the
EU
A
ustri
a, Fi
nlan
d an
d Sw
eden
join
the
EU
19
99
1999
––in
trodu
ctio
n of
the
euro
in fi
nanc
ial tr
ansa
ctio
nsin
trodu
ctio
n of
the
euro
in fi
nanc
ial tr
ansa
ctio
ns20
02
2002
––12
cou
ntrie
s ado
pt e
uro
as it
s cur
renc
y12
cou
ntrie
s ado
pt e
uro
as it
s cur
renc
y1
May
200
4 1
May
200
4 -- t
he C
zech
Rep
ublic
, Hun
gary
, Pol
and,
Slo
vaki
a, E
ston
ia, L
atvi
a,th
e Cz
ech
Repu
blic
, Hun
gary
, Pol
and,
Slo
vaki
a, E
ston
ia, L
atvi
a,Li
thua
nia,
Slov
enia,
Cyp
rus a
nd M
alta
join
the
EU
.Li
thua
nia,
Slov
enia,
Cyp
rus a
nd M
alta
join
the
EU
.20
07
2007
––Bu
lgar
ia an
d Ro
man
ia jo
in th
e E
U
Bulg
aria
and
Rom
ania
join
the
EU
Thr
ee P
illar
s:T
hree
Pill
ars:
EU
ROPE
AN
EU
ROPE
AN
COM
MU
NIT
IES
COM
MU
NIT
IES
Com
mon
Mar
ket
Com
mon
Mar
ket
(inclu
ding
(in
cludi
ng
regu
latio
ns)
regu
latio
ns)
Eco
nom
ic
Eco
nom
ic
cohe
sion
polic
yco
hesio
n po
licy
Com
mon
Co
mm
on
Agr
icultu
ral
Agr
icultu
ral
Polic
yPo
licy
Inno
vatio
n Po
licy
Inno
vatio
n Po
licy
Com
petit
ion
Com
petit
ion
Polic
yPo
licy
COCO-- O
PERA
TIO
N
OPE
RATI
ON
IN
CRI
MIN
AL
IN C
RIM
INA
L M
ATT
ERS
MA
TTE
RSJu
stic
e an
d le
gal
Just
ice a
nd le
gal
affa
irs
affa
irs
(ext
radi
tions
, (e
xtra
ditio
ns,
fight
ing
orga
nize
d fig
htin
g or
gani
zed
crim
e et
c)cr
ime
etc)
Asy
lum
and
A
sylu
m a
nd
imm
igra
tion
imm
igra
tion
FORE
IGN
FO
REIG
N
POLI
CY,
POLI
CY,
DE
FEN
SE A
ND
D
EFE
NSE
AN
D
SECU
RITY
SECU
RITY
Coop
erat
ion
in
Coop
erat
ion
in
peac
ekee
ping
pe
acek
eepi
ng
oper
atio
nsop
erat
ions
Coor
dina
tion
of
Coor
dina
tion
of
fore
ign
polic
yfo
reig
n po
licy
Main
inst
itutio
ns:
Main
inst
itutio
ns:
The
The
Cou
ncil
of M
inis
ters
of t
he E
urop
ean
Uni
on
Cou
ncil
of M
inis
ters
of t
he E
urop
ean
Uni
on ––
the
mai
n E
U le
gisl
ativ
e bo
dyth
e m
ain
EU
legi
slat
ive
body
. Its
main
task
is to
. I
ts m
ain ta
sk is
to
repr
esen
t mem
ber s
tate
sre
pres
ent m
embe
r sta
tes
The
The
Eur
opea
n Pa
rliam
ent
Eur
opea
n Pa
rliam
ent --
exer
cises
legi
slativ
e an
d ex
ercis
es le
gisla
tive
and
budg
etar
y po
wer
s with
the
Coun
cil o
f the
Eur
opea
n bu
dget
ary
pow
ers w
ith th
e Co
uncil
of t
he E
urop
ean
Uni
on, r
epre
sent
s the
peo
ple.
Uni
on, r
epre
sent
s the
peo
ple.
The
The
Eur
opea
n C
omm
issi
on
Eur
opea
n C
omm
issi
on --
the
main
exe
cutiv
e th
e m
ain e
xecu
tive
body
. It p
ropo
ses n
ew le
gisla
tion
and
bear
s bo
dy. I
t pro
pose
s new
legi
slatio
n an
d be
ars
resp
onsib
ility
for p
olicy
impl
emen
tatio
n. It
is ta
sked
re
spon
sibili
ty fo
r pol
icy im
plem
enta
tion.
It is
task
ed
with
pro
tect
ion
of c
omm
on in
tere
st o
f the
EU
with
pro
tect
ion
of c
omm
on in
tere
st o
f the
EU
The
Gen
esis
of t
he E
UR
OT
he G
enes
is o
f the
EU
RO
1970
s. Th
e co
llaps
e of
the
1970
s. Th
e co
llaps
e of
the
Bret
ton
Woo
dBr
etto
n W
ood s
syst
em ta
kes p
lace.
s s
yste
m ta
kes p
lace.
Th
e E
urop
ean
coun
tries
mak
e a
spec
ial a
ggre
emen
t on
The
Eur
opea
n co
untri
es m
ake
a sp
ecial
agg
reem
ent o
n m
ainta
inin
g st
able
exch
ange
rate
s (ba
nd 2
.25%
). m
ainta
inin
g st
able
exch
ange
rate
s (ba
nd 2
.25%
).
1979
, the
syst
em is
disb
ande
d. T
he E
urop
ean
Mon
etar
y Sy
stem
19
79, t
he sy
stem
is d
isban
ded.
The
Eur
opea
n M
onet
ary
Syst
em
and
the
Eur
opea
n E
xcha
nge
Rate
Mec
hani
sm (E
RMan
d th
e E
urop
ean
Exc
hang
e Ra
te M
echa
nism
(ERM
-- I) a
re
I) ar
e cr
eate
d. F
ixed
exc
hang
e ra
tes a
re m
ainta
ined
bet
wee
n cu
rren
cies
crea
ted.
Fix
ed e
xcha
nge
rate
s are
main
tain
ed b
etw
een
curr
encie
s of
8 E
urop
ean
coun
tries
. The
cen
tral r
ole
is pl
ayed
by
a hi
ghly
of 8
Eur
opea
n co
untri
es. T
he c
entra
l rol
e is
play
ed b
y a
high
ly--
stab
le D
euts
chem
ark.
stab
le D
euts
chem
ark.
Ear
ly 1
990s
E
arly
199
0s ––
pres
sure
s on
the
Eur
opea
n ex
chan
ge sy
stem
pr
essu
res o
n th
e E
urop
ean
exch
ange
syst
em
indu
ced
by th
e re
unifi
catio
n of
Ger
man
y. in
duce
d by
the
reun
ifica
tion
of G
erm
any.
EM
S C
risis
1992
EM
S C
risis
1992
Afte
r the
reun
ifica
tion
of G
erm
any;
Afte
r the
reun
ifica
tion
of G
erm
any;
dem
and
pres
sure
cau
ses t
he in
flatio
n de
man
d pr
essu
re c
ause
s the
infla
tion
in G
erm
any
to g
o up
in G
erm
any
to g
o up
Bund
esba
nkBu
ndes
bank
tight
ens m
onet
ary
tight
ens m
onet
ary
polic
ypo
licy
Tigh
t mon
etar
y po
licy
is Ti
ght m
onet
ary
polic
y is
inap
prop
riate
for t
he re
st o
f Eur
ope
inap
prop
riate
for t
he re
st o
f Eur
ope
(esp
. the
UK
), w
hich
is in
a re
cess
ion
(esp
. the
UK
), w
hich
is in
a re
cess
ion
Rum
ours
Rum
ours
of d
evalu
atio
n lea
d to
a
of d
evalu
atio
n lea
d to
a
pan
pan --
Eur
opea
n cu
rren
cy c
risis
Eur
opea
n cu
rren
cy c
risis
Polic
ymak
ers f
ace
the
ques
tion:
Polic
ymak
ers f
ace
the
ques
tion:
Wha
t to
do n
ow?
Wha
t to
do n
ow?
The
Inte
nsifi
catio
n of
Wor
ks o
n T
he In
tens
ifica
tion
of W
orks
on
EU
RO
EU
RO
1988
19
88 ––
EC
coun
tries
wan
t a c
omm
on c
urre
ncy
EC
coun
tries
wan
t a c
omm
on c
urre
ncy
––D
elors
D
elors
Co
mm
issio
n pr
epar
es a
3Co
mm
issio
n pr
epar
es a
3-- s
tage
plan
stag
e pl
an19
90
1990
––St
age
ISt
age
I––
abol
ition
of e
xcha
nge
cont
rols
abol
ition
of e
xcha
nge
cont
rols
1992
19
92 ––
Trea
ty o
f Maa
stric
ht
Trea
ty o
f Maa
stric
ht ––
the
treat
y pr
ecise
d th
e th
e tre
aty
prec
ised
the
cond
ition
s of t
he a
dopt
ion
of th
e E
uro
later
kno
w a
s co
nditi
ons o
f the
ado
ptio
n of
the
Eur
o lat
er k
now
as
the
Stab
ility
and
Gro
wth
Pac
tth
e St
abili
ty a
nd G
row
th P
act
1994
19
94 --
Stag
e II
Stag
e II
––m
ainta
inin
g cu
rren
cy p
ariti
esm
ainta
inin
g cu
rren
cy p
ariti
es19
99
1999
––St
age
III
Stag
e II
Ist
arte
d in
trodu
ctio
n of
the
Eur
o in
st
arte
d in
trodu
ctio
n of
the
Eur
o in
fin
ancia
l tra
nsac
tions
finan
cial t
rans
actio
ns20
02
2002
––12
EU
cou
ntrie
s ado
pt e
uro
as it
s cur
renc
y12
EU
cou
ntrie
s ado
pt e
uro
as it
s cur
renc
y
Opt
imal
Cur
renc
y Ar
eas:
Opt
imal
Cur
renc
y Ar
eas:
Sym
met
ry, F
lexi
bilit
ySy
mm
etry
, Fle
xibi
lity ……
Inte
grat
ion?
Inte
grat
ion?
Thin
k of
thes
e tw
o Th
ink
of th
ese
two
varia
bles
as g
oods
on
a va
riabl
es a
s goo
ds o
n a
budg
etbu
dget
It is
nega
tively
slop
ed
It is
nega
tively
slop
ed
beca
use
a de
clini
ng
beca
use
a de
clini
ng
degr
ee o
f sym
met
ry
degr
ee o
f sym
met
ry
(whi
ch ra
ises t
he c
osts
) (w
hich
raise
s the
cos
ts)
nece
ssita
tes a
n in
crea
sing
nece
ssita
tes a
n in
crea
sing
flexi
bilit
y.fle
xibi
lity.
Wha
t doe
s int
egra
tion
Wha
t doe
s int
egra
tion
due
for t
he O
CA? H
as it
du
e fo
r the
OCA
? Has
it
been
impl
emen
ted?
been
impl
emen
ted?
Cycl
icall
y ad
just
ed b
udge
t bala
nce
in th
e E
uroz
one
Cycl
icall
y ad
just
ed b
udge
t bala
nce
in th
e E
uroz
one
and
the
US
and
the
US
The
EU
is n
ot re
spon
ding
fisc
ally,
and
the
econ
omies
are
pay
ing
the
price
.
Fran
kfur
tFr
ankf
urt --
Bru
ssel
s Con
sens
usB
russ
els C
onse
nsus
Ratio
nal E
xpec
tatio
ns (1
970s
Ra
tiona
l Exp
ecta
tions
(197
0s ––
crea
ted
by L
ucas
and
cr
eate
d by
Luc
as a
nd S
arge
ntSa
rgen
t ))Re
al Bu
sines
s Cyc
le Re
al Bu
sines
s Cyc
le (1
980s
(1
980s
––K
ydlan
dK
ydlan
d&
&
Pr
esco
tt)Pr
esco
tt)
Rat
iona
l Exp
ecta
tions
(1)
Rat
iona
l Exp
ecta
tions
(1)
indi
vidu
als m
ake
thei
r dec
ision
on
the
basis
of
indi
vidu
als m
ake
thei
r dec
ision
on
the
basis
of
curr
ent a
nd b
est i
nfor
mat
ion
abou
t the
futu
recu
rren
t and
bes
t inf
orm
atio
n ab
out t
he fu
ture
indi
vidu
als d
o in
divi
duals
do
not
not m
ake
thei
r pre
dict
ions
on
mak
e th
eir p
redi
ctio
ns o
n irr
atio
nal b
asis
(Key
nes
irrat
iona
l bas
is (K
eyne
s ’’an
imal
spiri
ts),
or
anim
al sp
irits
), or
m
ainly
on
the
past
exp
erie
nce
(ada
ptiv
e m
ainly
on
the
past
exp
erie
nce
(ada
ptiv
e ex
pect
atio
ns)
expe
ctat
ions
)
Rat
iona
l Exp
ecta
tions
(2)
Rat
iona
l Exp
ecta
tions
(2)
Basic
tene
ts o
f mon
etar
ism
Basic
tene
ts o
f mon
etar
ism ––
mon
etar
y po
licy
mon
etar
y po
licy
acts
with
long
and
var
iable
lags
acts
with
long
and
var
iable
lags
Conc
lusio
n: n
o fin
eCo
nclu
sion:
no
fine --
tuni
ngtu
ning
Onl
y O
nly
unex
pect
edun
expe
cted
mon
etar
y po
licy
can
take
an
mon
etar
y po
licy
can
take
an
effe
ct o
n G
DP
effe
ct o
n G
DP
Exp
ecte
d po
licy
can
still
aff
ect i
nflat
ion,
thou
gh.
Exp
ecte
d po
licy
can
still
aff
ect i
nflat
ion,
thou
gh.
Mar
kets
cle
ar in
stan
tane
ously
as s
oon
as c
orre
ct
Mar
kets
cle
ar in
stan
tane
ously
as s
oon
as c
orre
ct
info
rmat
ion
abou
t pric
es is
supp
lied
to th
emin
form
atio
n ab
out p
rices
is su
pplie
d to
them
Cre
dibi
lity
of a
Cen
tral B
ank
Cre
dibi
lity
of a
Cen
tral B
ank
Infla
tion=
Infla
tion=
f(uf(u) +
supp
ly sh
ocks
+
) + su
pply
shoc
ks +
exp
. inf
latio
nex
p. in
flatio
nPe
ople
form
their
exp
ecta
tions
on
the
basis
of c
entra
l Pe
ople
form
their
exp
ecta
tions
on
the
basis
of c
entra
l ba
nkba
nk’’ s
pron
ounc
emen
tss p
rono
unce
men
tsPe
ople
will
not
beli
eve
in c
entra
l ban
kPe
ople
will
not
beli
eve
in c
entra
l ban
k ’’s s
pron
ounc
emen
ts if
the
actio
ns o
f the
cen
tral b
ank
wer
e pr
onou
ncem
ents
if th
e ac
tions
of t
he c
entra
l ban
k w
ere
to th
e co
ntra
ry in
the
past
to th
e co
ntra
ry in
the
past
If a
cen
tral b
ank
bow
s to
pres
sure
s and
loos
ens
If a
cen
tral b
ank
bow
s to
pres
sure
s and
loos
ens
mon
etar
y po
licy,
it lo
ses i
ts c
redi
bilit
y an
d pe
ople
mon
etar
y po
licy,
it lo
ses i
ts c
redi
bilit
y an
d pe
ople
expe
ct h
ighe
r inf
latio
n in
the
futu
re.
expe
ct h
ighe
r inf
latio
n in
the
futu
re.
Cred
ibili
ty o
f the
cen
tral b
ank
Cred
ibili
ty o
f the
cen
tral b
ank
––po
licies
shou
ld b
e po
licies
shou
ld b
e st
able
and
aim
ed a
t inf
latio
nst
able
and
aim
ed a
t inf
latio
n
Rea
l Bus
ines
s Cyc
leR
eal B
usin
ess C
ycle
Rand
om w
alk o
f GD
P th
eory
(GD
P do
es n
ot
Rand
om w
alk o
f GD
P th
eory
(GD
P do
es n
ot
have
to c
ome
to th
e m
ain tr
end)
have
to c
ome
to th
e m
ain tr
end)
Chan
ges i
n G
DP
grow
th in
duce
d m
ainly
by
Chan
ges i
n G
DP
grow
th in
duce
d m
ainly
by
supp
ly sh
ocks
(tec
hnol
ogic
al ch
ange
s)su
pply
shoc
ks (t
echn
olog
ical
chan
ges)
Prop
agat
ion
mec
hani
sm
Prop
agat
ion
mec
hani
sm ––
in sh
ort:
low
er
in sh
ort:
low
er
prod
uctiv
ity m
akes
peo
ple
wor
k le
sspr
oduc
tivity
mak
es p
eopl
e w
ork
less
Bru
ssel
lsB
russ
ells
-- Fra
nkfu
rt C
onse
nsus
Fran
kfur
t Con
sens
us
Inde
pend
ent E
urop
ean
Cent
ral B
ank
Inde
pend
ent E
urop
ean
Cent
ral B
ank
Infla
tion
targ
etin
g po
licy
Infla
tion
targ
etin
g po
licy
The
risk
of a
sym
met
ric sh
ocks
is sm
allTh
e ris
k of
asy
mm
etric
shoc
ks is
small
The
risk
of a
dver
se sh
ocks
may
be
miti
gate
d Th
e ris
k of
adv
erse
shoc
ks m
ay b
e m
itiga
ted
endo
geno
usly
by
furth
er e
cono
mic
inte
grat
ion
endo
geno
usly
by
furth
er e
cono
mic
inte
grat
ion
The
risk
of a
dver
se sh
ocks
can
furth
er b
e Th
e ris
k of
adv
erse
shoc
ks c
an fu
rther
be
miti
gate
d by
STR
UCT
URA
L RE
FORM
Sm
itiga
ted
by S
TRU
CTU
RAL
REFO
RMS
Sum
mar
y Su
mm
ary
-- Whi
ch V
iew
?W
hich
Vie
w?
Mun
dell
Mun
dell
IIPo
litics
is p
aram
ount
Polit
ics is
par
amou
ntIn
tegr
atio
n is
the
only
In
tegr
atio
n is
the
only
su
stain
able
way
to
sust
ainab
le w
ay to
co
ordi
nate
fisc
al po
licy,
coor
dina
te fi
scal
polic
y, w
hich
is n
eces
sary
to
whi
ch is
nec
essa
ry to
co
mba
t nat
ural
com
bat n
atur
al co
mpl
icatio
ns o
f a
com
plica
tions
of a
m
onet
ary
unio
n.m
onet
ary
unio
n.E
urop
ean
Eur
opea
n Su
pers
tate
Supe
rsta
te??
Brus
sels
Brus
sels --
Fran
kfur
tFr
ankf
urt
Mon
etar
ist v
iew
Mon
etar
ist v
iew
Cent
ral B
ank
can
cont
rol
Cent
ral B
ank
can
cont
rol
all th
at is
nec
essa
ryall
that
is n
eces
sary
Trea
ties l
ike
SGP
can
lead
Trea
ties l
ike
SGP
can
lead
to fi
scal
refo
rms
to fi
scal
refo
rms
Uni
on o
f Nat
ion
Uni
on o
f Nat
ion --
stat
es?
stat
es?
Wha
t do
you
thin
k?W
hat d
o yo
u th
ink?
DAT
AD
ATA
GD
P G
row
thG
DP
Gro
wth
The
Eur
ozon
e ha
s had
Th
e E
uroz
one
has h
ad
grow
th o
ver t
he la
st fi
ve
grow
th o
ver t
he la
st fi
ve
year
s afte
r poo
r gro
wth
righ
t ye
ars a
fter p
oor g
row
th ri
ght
afte
r the
ince
ptio
n of
the
afte
r the
ince
ptio
n of
the
Eur
oE
uro
Gro
wth
spre
ads a
cros
s G
row
th sp
read
s acr
oss
natio
nsna
tions
Gro
wth
is sl
ow o
vera
ll,
Gro
wth
is sl
ow o
vera
ll,
thou
gh. U
s gro
wth
rate
has
th
ough
. Us g
row
th ra
te h
as
been
2.6
%, c
ompa
red
to
been
2.6
%, c
ompa
red
to
1.7%
for t
he E
uroz
one
1.7%
for t
he E
uroz
one
Infla
tion
prob
lem
sIn
flatio
n pr
oble
ms
Infla
tion
rate
s wer
e br
ough
t in
line
Infla
tion
rate
s wer
e br
ough
t in
line
befo
re th
e in
trodu
ctio
n of
the
befo
re th
e in
trodu
ctio
n of
the
Eur
o in
ord
er to
coo
rdin
ate
Eur
o in
ord
er to
coo
rdin
ate
trans
ition
.tra
nsiti
on.
Sinc
e th
en, t
hey
have
serio
usly
Si
nce
then
, the
y ha
ve se
rious
ly
dive
rged
dive
rged
Big
issue
for c
reat
ing
asym
met
ries,
Big
issue
for c
reat
ing
asym
met
ries,
real
exch
ange
rate
s, an
d cy
clic
al re
al ex
chan
ge ra
tes,
and
cycl
ical
diff
icul
ties
diff
icul
ties
Ove
r the
199
9-20
04 p
erio
d, th
e ra
nge
of c
umul
ativ
e in
flatio
n ac
ross
EM
U
mem
ber c
ount
ries w
as 1
6.5
perc
ent,
whe
reas
the
rang
e fo
r US
regi
ons w
as
only
8.7
perc
ent.
The
prob
lem is
mor
e pe
rsist
ent i
n th
e E
U
Infla
tion
and
Infla
tion
and
Exc
hang
e R
ates
Exc
hang
e R
ates
Pric
es a
re d
iffer
ent
Pric
es a
re d
iffer
ent
Eve
n th
ough
the
Eur
ozon
e is
a sin
gle
Eve
n th
ough
the
Eur
ozon
e is
a sin
gle
mar
ket,
price
s are
diff
eren
t with
in
mar
ket,
price
s are
diff
eren
t with
in
diffe
rent
cou
ntrie
s, an
d th
e di
ffere
nt c
ount
ries,
and
the
com
petit
iven
ess o
f nat
ions
with
in th
e co
mpe
titiv
enes
s of n
atio
ns w
ithin
the
Eur
ozon
e is
very
disp
arat
eE
uroz
one
is ve
ry d
ispar
ate
Eff
ect o
n ex
chan
ge ra
tes
Eff
ect o
n ex
chan
ge ra
tes
All
the
Eur
ozon
e is
a Si
ngle
Mar
ket w
ith
All
the
Eur
ozon
e is
a Si
ngle
Mar
ket w
ith
no e
xcha
nge
rate
s, bu
t with
pric
es
no e
xcha
nge
rate
s, bu
t with
pric
es
diffe
ring
diffe
ring
acro
sac
ros
natio
nal l
ines
and
diff
eren
t na
tiona
l lin
es a
nd d
iffer
ent
infla
tion
rate
s, th
e re
al ex
chan
ge ra
tes o
n in
flatio
n ra
tes,
the
real
exch
ange
rate
s on
good
s is v
ery
dive
rgen
t.go
ods i
s ver
y di
verg
ent.
The
lack
of a
mon
etar
y fix
har
ms b
oth
The
lack
of a
mon
etar
y fix
har
ms b
oth
ends
ends
Boom
ing
econ
omies
like
Ger
man
y w
ants
Bo
omin
g ec
onom
ies li
ke G
erm
any
wan
ts
a hi
gher
inte
rest
rate
, whi
le na
tions
like
a
high
er in
tere
st ra
te, w
hile
natio
ns li
ke
Portu
gal a
nd It
aly w
ould
wan
t a lo
wer
Po
rtuga
l and
Italy
wou
ld w
ant a
low
er
one.
Mod
erat
ion
prov
ides
stab
ility
on
one.
Mod
erat
ion
prov
ides
stab
ility
on
aver
age,
but n
ot a
nsw
ers t
o in
flatio
n av
erag
e, bu
t not
ans
wer
s to
infla
tion
issue
siss
ues
Eur
o an
d Fi
nanc
ial M
arke
tsE
uro
and
Fina
ncia
l Mar
kets
“Yie
ld d
iffer
entia
ls ac
ross
mem
ber
coun
tries
fell
shar
ply,
the
volu
me
of p
rivat
e bo
nd is
sues
gre
w ra
pidl
y an
d…th
e m
arke
t mic
rost
ruct
ure
conv
erge
d to
a c
omm
on a
rea-
wid
e sy
stem
.”(L
ane,
The
Real
Eff
ects
of
the
EM
U)
Out
stan
ding
stoc
k of
secu
ritie
s iss
ued
by c
orpo
rate
sin
the
Eur
o ar
ea h
as g
row
n fr
om 3
2.2
perc
ent
of G
DP
at th
e en
d of
199
8 to
74.
5 pe
rcen
t of G
DP
by Ju
ne 2
005.
Intra
-Eur
o FD
I up
by 6
2%W
hy? Pa
n-E
urop
ean
view
Mor
e tru
st in
cur
renc
iesM
ore
trust
in fu
ture
inte
grat
ion
Effe
cts o
f Fin
anci
al S
ucce
ssE
ffect
s of F
inan
cial
Suc
cess
Risk
div
ersif
icatio
nRi
sk d
iver
sifica
tion
Inte
rnat
iona
l risk
hed
ging
Inte
rnat
iona
l risk
hed
ging
Doe
s thi
s rea
lly h
ave
an im
pact
?D
oes t
his r
eally
hav
e an
impa
ct?
Coun
tries
can
run
large
r cur
rent
acc
ount
def
icits
Coun
tries
can
run
large
r cur
rent
acc
ount
def
icits
Gre
ece,
Portu
gal,
Spain
Gre
ece,
Portu
gal,
Spain
Goo
d in
the
long
run?
Goo
d in
the
long
run?
How
long
can
this
last
?H
ow lo
ng c
an th
is la
st?
Rate
s of r
etur
n to
inve
stm
ent h
ave
been
falli
ngRa
tes o
f ret
urn
to in
vest
men
t hav
e be
en fa
lling
Dol
lar d
epre
ciat
ion
Dol
lar d
epre
ciat
ion
Oil
pric
e in
crea
ses
Oil
pric
e in
crea
ses
Coul
d le
ad to
197
0s li
ke o
il di
ffic
ultie
sCo
uld
lead
to 1
970s
like
oil
diff
icul
ties
Slum
ps a
nd h
ow th
ey w
ork
Slum
ps a
nd h
ow th
ey w
ork
Eur
o br
ings
cre
dibi
lity
to p
laces
with
poo
r pric
e E
uro
brin
gs c
redi
bilit
y to
plac
es w
ith p
oor p
rice
stab
ility
and
hig
h in
tere
st ra
tes
stab
ility
and
hig
h in
tere
st ra
tes
Bond
, sto
ck, a
nd h
ousin
g pr
ices g
o up
, cap
ital f
low
s in.
Bo
nd, s
tock
, and
hou
sing
price
s go
up, c
apita
l flo
ws i
n.
Inve
stm
ent r
ises,
hous
ehol
ds g
et ri
cher
, con
sum
ptio
n In
vest
men
t rise
s, ho
useh
olds
get
rich
er, c
onsu
mpt
ion
rises
rises
But t
hen
the
capi
tal s
tock
adj
usts
, and
sinc
e th
e ca
pita
l Bu
t the
n th
e ca
pita
l sto
ck a
djus
ts, a
nd si
nce
the
capi
tal
flow
rare
ly bo
osts
pro
duct
ivity
ver
y m
uch,
loss
of
flow
rare
ly bo
osts
pro
duct
ivity
ver
y m
uch,
loss
of
com
petit
iven
ess o
ccur
s co
mpe
titiv
enes
s occ
urs
Slow
gro
wth
, hig
h un
empl
oym
ent,
and
defla
tion.
Slow
gro
wth
, hig
h un
empl
oym
ent,
and
defla
tion.
Tem
ptat
ion
is to
use
mon
etar
y po
licy
to fi
x th
e Te
mpt
atio
n is
to u
se m
onet
ary
polic
y to
fix
the
prob
lem
prob
lem ––
but t
his i
snbu
t thi
s isn
’’ t po
ssib
le.t p
ossib
le.
The
Bou
nces
The
Bou
nces
Slum
ps a
nd th
e Fu
ture
Slum
ps a
nd th
e Fu
ture
The
Eur
o ha
s a te
nden
cy to
bou
nce
The
Eur
o ha
s a te
nden
cy to
bou
nce
slum
ps a
roun
d th
e sy
stem
as a
n slu
mps
aro
und
the
syst
em a
s an
inst
itutio
nal e
ffec
tin
stitu
tiona
l eff
ect
Affe
ct c
ount
ries w
hich
beg
an a
t a
Affe
ct c
ount
ries w
hich
beg
an a
t a
lesse
r lev
el of
succ
ess a
nd w
ere
lesse
r lev
el of
succ
ess a
nd w
ere
push
ed fo
rwar
d by
the
unio
n.pu
shed
forw
ard
by th
e un
ion.
How
doe
s thi
s affe
ct th
e fu
ture
of
How
doe
s thi
s affe
ct th
e fu
ture
of
the
Eur
ozon
e? W
ill e
xpan
sion
into
th
e E
uroz
one?
Will
exp
ansio
n in
to
Eas
tern
Eur
ope
crea
te e
ven
mor
e E
aste
rn E
urop
e cr
eate
eve
n m
ore
of th
ese
slum
ps? W
ill e
ntre
nche
d of
thes
e slu
mps
? Will
ent
renc
hed
EU
cou
ntrie
s lik
e Ita
ly an
d E
U c
ount
ries l
ike
Italy
and
Portu
gal l
eave
the
Eur
ozon
e du
e to
Po
rtuga
l lea
ve th
e E
uroz
one
due
to
slum
p?
slum
p?
Bru
ssel
sB
russ
els --
Fran
kfur
tFr
ankf
urt
Strik
es B
ack
Strik
es B
ack ……
(1)
(1)
The
risk
of a
sym
met
ric sh
ocks
Th
e ris
k of
asy
mm
etric
shoc
ks
can
be m
itiga
ted
by m
ore
can
be m
itiga
ted
by m
ore
flexi
bilit
y in
the
labor
mar
ket.
flexi
bilit
y in
the
labor
mar
ket.
As B
lanch
ard
(200
6) a
rgue
s: all
A
s Blan
char
d (2
006)
arg
ues:
all
coun
tries
affe
cted
by
shoc
ks h
ave
coun
tries
affe
cted
by
shoc
ks h
ave
infle
xibl
e lab
or m
arke
tsin
flexi
ble
labor
mar
kets
Flex
ibili
ty re
form
s nee
ded
also
to
Flex
ibili
ty re
form
s nee
ded
also
to
face
the
com
petit
ion
of e
mer
ging
fa
ce th
e co
mpe
titio
n of
em
ergi
ng
econ
omies
ec
onom
ies -- >
Eur
o as
a g
ood
> E
uro
as a
goo
d st
imul
us (d
evalu
atio
n is
stim
ulus
(dev
aluat
ion
is im
poss
ible)
impo
ssib
le)
Bru
ssel
s B
russ
els
––Fr
ankf
urt S
trike
s Bac
kFr
ankf
urt S
trike
s Bac
k ……(2
)(2
)
Rota
ting
slum
ps a
re
Rota
ting
slum
ps a
re s
peci
ficsp
ecifi
c-- >
indu
ced
by th
e >
indu
ced
by th
e ex
pect
atio
ns o
f joi
ning
the
Eur
o ar
ea
expe
ctat
ions
of j
oini
ng th
e E
uro
area
-- > in
the
futu
re th
is >
in th
e fu
ture
this
may
not
be
the
case
.m
ay n
ot b
e th
e ca
se.
Furth
er e
cono
mic
inte
grat
ion
will
Fu
rther
eco
nom
ic in
tegr
atio
n w
ill e
ndog
enou
sly
endo
geno
usly
low
er
low
er
the
risks
of a
sym
met
ric sh
ocks
the
risks
of a
sym
met
ric sh
ocks
In g
ener
al, th
ere
are
In g
ener
al, th
ere
are
no w
ide
diffe
renc
esno
wid
e di
ffere
nces
in E
urop
e in
in
Eur
ope
in
rega
rds t
o ou
tput
gro
wth
(re
gard
s to
outp
ut g
row
th ( G
ianno
neG
ianno
ne&
&
Rei
chlin
Reic
hlin
(200
6))
(200
6))
Arti
sA
rtis , ,
Kro
zlig
Kro
zlig
and
Toro
(199
9),
and
Toro
(199
9), M
anso
urM
anso
ur(2
003)
and
Del
(2
003)
and
Del
N
egro
and
N
egro
and
Ottr
okO
ttrok
(200
3) lo
ok a
t lon
g(2
003)
look
at l
ong --
term
dat
a an
d te
rm d
ata
and
argu
e in
favo
r of a
ar
gue
in fa
vor o
f a E
urop
ean
busi
ness
cyc
leE
urop
ean
busi
ness
cyc
le
GD
P gr
owth
cor
rela
tions
and
G
DP
grow
th c
orre
latio
ns a
nd
rece
ssio
nsre
cess
ions
Cor
rela
tions
are
hig
h!
Dire
ctio
nD
irect
ion ::
Mor
e in
tegr
atio
n an
d m
ore
flexi
bilit
y!M
ore
inte
grat
ion
and
mor
e fle
xibi
lity!
(as w
e ca
n se
e, Je
an-C
laude
Tric
het,
ECB
Pre
siden
t, is
show
ing
the
dire
ctio
n…or
may
be so
met
hing
else
)
Wha
t do
you
thin
k?W
hat d
o yo
u th
ink?
Will
it c
olla
pse?
Will
it c
olla
pse?
Will
som
eone
walk
aw
ay?
Will
som
eone
walk
aw
ay?
Can
the
Eur
o C
olla
pse?
Can
the
Eur
o C
olla
pse?
It is
poss
ible
for a
syst
em su
ch a
s the
Eur
o to
fall
apar
t. Th
e It
is po
ssib
le fo
r a sy
stem
such
as t
he E
uro
to fa
ll ap
art.
The
coali
tion
is he
ld to
geth
er b
y m
utua
l goo
dwill
. Unl
ike
the
US
or
coali
tion
is he
ld to
geth
er b
y m
utua
l goo
dwill
. Unl
ike
the
US
or
anot
her f
eder
ated
Uni
on, t
here
anot
her f
eder
ated
Uni
on, t
here
’’ s no
cen
tral c
oerc
ive
pow
er. S
o s n
o ce
ntra
l coe
rciv
e po
wer
. So
why
wou
ld a
cou
ntry
leav
e?w
hy w
ould
a c
ount
ry le
ave?
Coun
try is
bein
g he
ld b
ack
due
to it
s suc
cess
Coun
try is
bein
g he
ld b
ack
due
to it
s suc
cess
Ger
man
y is
the
5G
erm
any
is th
e 5thth
bigg
est e
cono
my
in th
e w
orld
and
has
bee
n bo
omin
g bi
gges
t eco
nom
y in
the
wor
ld a
nd h
as b
een
boom
ing
ever
sinc
e it
reco
vere
d fr
om re
unifi
catio
n. It
wan
ts to
be
able
ev
er si
nce
it re
cove
red
from
reun
ifica
tion.
It w
ants
to b
e ab
le to
con
trol i
ts
to c
ontro
l its
ow
n m
onet
ary
polic
y sin
ce th
e pr
ice
own
mon
etar
y po
licy
since
the
pric
e --st
abili
ty m
odel
that
the
EM
U fo
llow
s st
abili
ty m
odel
that
the
EM
U fo
llow
s do
esn
does
n ’’t l
et G
erm
any
live
up to
its f
ull p
oten
tial.
Ove
r 60%
of G
erm
ans
t let
Ger
man
y liv
e up
to it
s ful
l pot
entia
l. O
ver 6
0% o
f Ger
man
sno
w w
ant t
o re
turn
to th
e D
euts
chm
ark,
and
rece
ntly
a F
renc
h po
lno
w w
ant t
o re
turn
to th
e D
euts
chm
ark,
and
rece
ntly
a F
renc
h po
l l l re
veale
d ov
er 5
0% o
f tha
t pop
ulac
e w
ants
to re
turn
to th
e Fr
anc.
reve
aled
over
50%
of t
hat p
opul
ace
wan
ts to
retu
rn to
the
Fran
c.Co
untry
is b
eing
held
dow
n an
d fla
iling
Coun
try is
bein
g he
ld d
own
and
flaili
ngTh
ese
are
the
slum
p na
tions
, lik
e Po
rtuga
l and
Italy
. The
y ar
e b
Thes
e ar
e th
e slu
mp
natio
ns, l
ike
Portu
gal a
nd It
aly. T
hey
are
b ein
g ei
ng
hind
ered
by
havi
ng th
eir n
atio
nal c
urre
ncie
s wor
th m
ore
than
wou
hind
ered
by
havi
ng th
eir n
atio
nal c
urre
ncie
s wor
th m
ore
than
wou
ld b
e ld
be
natu
ral.
They
wou
ld w
ant t
o re
turn
to th
eir E
scud
o or
Lira
, dev
ana
tura
l. Th
ey w
ould
wan
t to
retu
rn to
thei
r Esc
udo
or L
ira, d
eva l
ue th
eir
lue
thei
r cu
rren
cies
, and
thus
boo
st e
xpor
ts.
curr
enci
es, a
nd th
us b
oost
exp
orts
.
Diff
icul
ties t
o br
eaki
ng a
way
Diff
icul
ties t
o br
eaki
ng a
way
Inst
itutio
nal
Inst
itutio
nal
The
natio
n w
ould
hav
e to
phy
sicall
y re
plac
e all
ATM
s, sig
ns, b
anTh
e na
tion
wou
ld h
ave
to p
hysic
ally
repl
ace
all A
TMs,
signs
, ban
king
app
arat
us,
king
app
arat
us,
etc.
This
was
ach
ieve
d in
ord
er to
inst
itute
the
Eur
o in
a 3
etc.
This
was
ach
ieved
in o
rder
to in
stitu
te th
e E
uro
in a
3-- m
onth
span
due
to
mon
th sp
an d
ue to
in
tens
e co
oper
atio
n an
d w
ill. W
ill it
be
doab
le fo
r a si
ngle
nat
inte
nse
coop
erat
ion
and
will
. Will
it b
e do
able
for a
sing
le na
t ion
to re
turn
to th
eir
ion
to re
turn
to th
eir
own
curr
ency
?ow
n cu
rren
cy?
Eco
nom
icE
cono
mic
ReRe-- p
ricin
g of
all
good
s, re
form
ing
the
bank
ing
sect
or, r
epr
icing
of a
ll go
ods,
refo
rmin
g th
e ba
nkin
g se
ctor
, re --
esta
blish
ing
inde
pend
ent
esta
blish
ing
inde
pend
ent
finan
cial
mar
kets
. The
se a
re ju
st so
me
of th
e po
ssib
le ec
onom
ic fin
anci
al m
arke
ts. T
hese
are
just
som
e of
the
poss
ible
econ
omic
issue
s for
iss
ues f
or
retu
rnin
g to
a n
atio
nal c
urre
ncy.
retu
rnin
g to
a n
atio
nal c
urre
ncy.
No
guar
ante
e th
at a
retu
rn to
nat
iona
l cur
renc
y w
ould
alle
viat
e N
o gu
aran
tee
that
a re
turn
to n
atio
nal c
urre
ncy
wou
ld a
llevi
ate
any
prob
lems.
any
prob
lems.
Polit
ical
Polit
ical
Any
nat
ions
whi
ch le
aves
the
Eur
o sy
stem
wou
ld b
e lo
oked
at q
uit
Any
nat
ions
whi
ch le
aves
the
Eur
o sy
stem
wou
ld b
e lo
oked
at q
uit e
disp
arag
ingl
y e
disp
arag
ingl
y by
the
natio
ns th
ey a
re a
band
onin
g. T
he n
atio
n th
at le
aves
wou
ldby
the
natio
ns th
ey a
re a
band
onin
g. T
he n
atio
n th
at le
aves
wou
ldst
ill b
e pa
rt of
st
ill b
e pa
rt of
th
e E
U a
nd th
e Si
ngle
Mar
ket,
but w
ould
hav
e m
uch
less
abi
lity
tth
e E
U a
nd th
e Si
ngle
Mar
ket,
but w
ould
hav
e m
uch
less
abi
lity
t o a
ffect
pol
icy.
o af
fect
pol
icy.
ItIt’’ s
neve
r a g
ood
idea
to m
ake
enem
ies,
and
if le
avin
g ca
used
a c
has n
ever
a g
ood
idea
to m
ake
enem
ies,
and
if le
avin
g ca
used
a c
hain
reac
tion
in re
actio
n w
hich
sign
ifica
ntly
dam
aged
the
Eur
ozon
e, th
e re
perc
ussio
ns c
oul
whi
ch si
gnifi
cant
ly da
mag
ed th
e E
uroz
one,
the
repe
rcus
sions
cou
l d b
e lo
ng a
nd
d be
long
and
di
sast
rous
.di
sast
rous
.
Wha
t do
you
thin
k?W
hat d
o yo
u th
ink?
Cen
tral
Cen
tral -- E
aste
rn E
urop
eE
aste
rn E
urop
e
So fa
r onl
y Sl
oven
ia ha
s eur
o as
its c
urre
ncy
So fa
r onl
y Sl
oven
ia ha
s eur
o as
its c
urre
ncy
(ado
pted
on
the
1(a
dopt
ed o
n th
e 1stst
of Ja
nuar
y 20
07)
of Ja
nuar
y 20
07)
Diff
eren
ces
Diff
eren
ces
(acc
ordi
ng to
Sus
an
(acc
ordi
ng to
Sus
an S
hadl
erSh
adle
r , IM
F , I
MF
seni
or e
xper
t)se
nior
exp
ert)
Hig
h ca
pita
l inf
low
s (re
vers
al an
d co
ntag
ion)
Hig
h ca
pita
l inf
low
s (re
vers
al an
d co
ntag
ion)
Balas
saBa
lassa
––Sa
mue
lson
effe
cts
Sam
uelso
n ef
fect
s ––
adju
stm
ent
adju
stm
ent
impo
ssib
le th
roug
h ex
chan
ge ra
tes,
so
impo
ssib
le th
roug
h ex
chan
ge ra
tes,
so
adju
stm
ent l
eads
to h
ighe
r inf
latio
n (1
adju
stm
ent l
eads
to h
ighe
r inf
latio
n (1
-- 2%
mor
e)2%
mor
e)H
igh
budg
et d
efic
itsH
igh
budg
et d
efic
itsRe
form
s in
finan
cial
syst
ems m
ay b
e in
suff
icie
ntRe
form
s in
finan
cial
syst
ems m
ay b
e in
suff
icie
nt
Con
clus
ion:
to jo
in th
e E
uroa
rea
Cen
tral-E
aste
rn E
urop
ean
coun
tries
sh
ould
impr
ove
finan
cial
supe
rvis
ion,
mak
e co
mpe
titio
n ro
bust
and
de
crea
se d
efic
its
To
join
or n
ot to
join
?T
o jo
in o
r not
to jo
in?
Gai
ns:
1.E
limin
atio
n of
cu
rren
cy e
xcha
nge
risks
.
2.M
ore
pric
e tra
nspa
renc
y –
grea
ter e
ffici
ency
3.T
he e
limin
atio
n of
th
e em
ergi
ng m
arke
t ris
ks
Cos
ts:
1.T
he lo
ss o
f con
trol
over
mon
etar
y po
licy
2.T
he li
kelin
ess o
f a
curr
ency
cris
is w
hile
st
ayin
g in
the
ER
M
II
The
mos
t im
porta
nt:
The
mos
t im
porta
nt:
The
risk
of
assy
met
ricsh
ocks
and
ro
tatin
g slu
mps
(B
lanch
ard’
s pa
per)
“Con
serv
ativ
e fis
cal p
olicy
an
d lo
w
infla
tion
is w
hat e
very
Ce
ntra
l –E
urop
ean
coun
try n
eeds
”Su
san
Shad
ler
VS.
Lack
of p
oliti
cal s
uppo
rt?La
ck o
f pol
itica
l sup
port?
PRO
-EU
ROA
GA
INST
EU
RO
One
mor
e da
nger
?O
ne m
ore
dang
er?
The
Eur
opea
n Th
e E
urop
ean
Supe
rsta
teSu
pers
tate
wou
ld in
evita
bly
(?) m
ean
the
wou
ld in
evita
bly
(?) m
ean
the
sync
hron
isatio
nsy
nchr
onisa
tion
of ta
xes a
nd so
cial s
ecur
ity p
olici
es.
of ta
xes a
nd so
cial s
ecur
ity p
olici
es.
Libe
ral r
efor
mer
s in
the
Eas
tern
Eur
ope
are
afra
id th
at
Libe
ral r
efor
mer
s in
the
Eas
tern
Eur
ope
are
afra
id th
at
it w
ould
mea
n it
wou
ld m
ean
equa
lisin
geq
ualis
ing
taxe
s in
Cent
ral
taxe
s in
Cent
ral ––
Eas
tern
E
aste
rn
Eur
ope
to th
e lev
el of
Wes
tern
Eur
ope
and
poss
ibly
the
Eur
ope
to th
e lev
el of
Wes
tern
Eur
ope
and
poss
ibly
the
slow
dow
n of
stru
ctur
al ch
ange
s in
the
slow
dow
n of
stru
ctur
al ch
ange
s in
the
labou
rlab
our m
arke
tm
arke
t -- >
>
that
may
lead
to th
e lo
ss o
f FD
I th
at m
ay le
ad to
the
loss
of F
DI c
ompe
tiven
ess
com
petiv
enes
sFr
ankf
urt
Fran
kfur
t -- Bru
ssels
Con
sens
us m
ay b
e a
bette
r opt
ion
Brus
sels
Cons
ensu
s may
be
a be
tter o
ptio
n fo
r Cen
tral
for C
entra
l -- Eas
tern
Eur
opea
n co
untri
es (?
).E
aste
rn E
urop
ean
coun
tries
(?).
Wha
t do
you
thin
k?W
hat d
o yo
u th
ink?
Ref
eren
ceR
efer
ence
Blan
char
d, O
livie
r. “P
ortu
gal,
Italy
, Spa
in, a
nd G
erm
any.
The
impl
icatio
ns o
f a
subo
ptim
al cu
rren
cy a
rea.
Oliv
ier B
lanch
ard”
. WE
L-M
IT m
eetin
g, N
YC,
Apr
il 20
06Ca
mpb
ell,
Mat
thew
. (20
06).
Cam
pbel
l, M
atth
ew. (
2006
). ““ N
on, n
ein, n
o: E
urop
e tu
rns n
egat
ive
on th
e E
uro
Non
, nein
, no:
Eur
ope
turn
s neg
ativ
e on
the
Eur
o ””. .
/The
Tim
es/,
Dec
embe
r 31,
200
6./T
he T
imes
/, D
ecem
ber 3
1, 2
006.
Eich
engr
een
Eich
engr
een ,
Bar
ry a
nd
, Bar
ry a
nd G
hiro
niG
hiro
ni, F
abio
(200
1).
, Fab
io (2
001)
. ““E
MU
and
Enl
arge
men
tE
MU
and
Enl
arge
men
t ””. C
onfe
renc
e . C
onfe
renc
e on
Eco
nom
ic an
d M
onet
ary
Uni
on o
rgan
ized
by
DG
on
Eco
nom
ic an
d M
onet
ary
Uni
on o
rgan
ized
by
DG
EcF
inE
cFin
of th
e E
urop
ean
of th
e E
urop
ean
Com
miss
ion,
Bru
ssel
s, 21
Co
mm
issio
n, B
russ
els,
21 --
22 M
arch
200
1**
22 M
arch
200
1**
Eich
engr
een
Eich
engr
een ,
Bar
ry (2
005)
. , B
arry
(200
5). ““
Eur
ope,
the
Eur
o an
d th
e E
CB: M
onet
ary
Succ
ess,
Fisc
al E
urop
e, th
e E
uro
and
the
ECB
: Mon
etar
y Su
cces
s, Fi
scal
Failu
re.
Failu
re. ””
Janu
ary
2005
Janu
ary
2005
Fito
ussi
Fito
ussi ,
Jean
Pau
l & F
ranc
esco
, J
ean
Paul
& F
ranc
esco
Sar
acen
oSa
race
no. . ““
The
Brus
sels
The
Brus
sels --
Fran
kfur
tFr
ankf
urt -- W
ashi
ngto
n W
ashi
ngto
n Co
nsen
sus.
Old
and
New
Tra
deof
fsCo
nsen
sus.
Old
and
New
Tra
deof
fs””
(200
4)(2
004)
Gian
none
Gian
none
, , Dom
enico
Dom
enico
and
and
Lucr
ezia
Lucr
ezia
Reich
linRe
ichlin
. . ““Tr
ends
and
cyc
les i
n th
e E
uro
Are
a: Tr
ends
and
cyc
les i
n th
e E
uro
Are
a: ho
w m
uch
hete
roge
neity
and
shou
ld w
e w
orry
abo
ut it
?ho
w m
uch
hete
roge
neity
and
shou
ld w
e w
orry
abo
ut it
? ””(2
006)
(200
6)Ch
artin
g a
Cour
se T
owar
dCh
artin
g a
Cour
se T
owar
dSc
hadl
erSc
hadl
er, S
usan
. , S
usan
. ““Su
cces
sful
Eur
o A
dopt
ion.
New
est E
U e
ntra
nts s
houl
d re
ap n
et
Succ
essf
ul E
uro
Ado
ptio
n. N
ewes
t EU
ent
rant
s sho
uld
reap
net
ga
ins f
rom
join
ing
the
gain
s fro
m jo
inin
g th
e eu
roeu
roar
ea.
area
. ””(2
004)
(200
4)