Redemption?

Abstract

The economic crisis which started in 2008 led to a strong rise in public debts. The sovereign debt crisis in euro area southern countries broke the unity of the euro area and weakened the "single currency" concept. The paper shows that this situation is not due to a lack of fiscal discipline in Europe, but to drifts in financial capitalism and to an inappropriately designed euro area economic policy framework. Public debts homogeneity needs to be resettled in Europe. European public debts should become safe assets again, and should not be subject to financial markets' assessment. EU Member States should not be requested to pay for past sins through austerity measures, and should not strengthen fiscal discipline through rules lacking economic rationale. The paper deals with recent proposals made to improve euro area governance (redemption fund, European Treasury, eurobonds, public debt guarantee by the ECB). The paper advocates for a full guarantee of government bonds for the Member States who commit to an economic policy coordination process, which should target GDP growth and coordinated reduction of imbalances.

Euro Area Macroeconomics. Where Do We Stand 20 Years Later?

“…The debt-to-GDP ratio would thus fall rapidly. But the proposal does not address the impacts of these restrictive policies on output, making the implicit assumption that the fiscal multiplier is nil (Mathieu and Sterdyniak, 2014). Similarly, the proposal does not consider the possibility that euro area economies might go through slowdown episodes in the next 25 years, which may require softening the restrictive stance of fiscal policies.…”

“…The drawbacks of the euro area framework were highlighted by the widening of imbalances prior to the 2008 financial crisis, and thereafter by the huge impact of the financial crisis, the sovereign debt crisis in Southern European countries, and the Great Recession. Prior to and after the crisis, EU institutions and Member States (MS) were not able to implement either a common economic strategy or satisfactory economic policy coordination (see, for instance, Mathieu and Sterdyniak, 2014).…”

Why and How has German Ordoliberalism Become a French Issue? Some Aspects about Ordoliberal Thoughts we can Learn from the French Reception

“…According to this view, the benefi ts of the Eurozone for the Member States catchingup, but, above all, the weaknesses of the euro area economic policy framework and the implementation of non-cooperative domestic policies, which have induced excessive competition and insuffi cient co-ordination between national economic policies, explain these growing disparities. 115 In a consistent manner with regard to the power structures in economics and economic policies in post-war Germany, 116 the narrative of the crisis put forward by the German government can be explained by the ' profligacy ' of several Member States, which has led to unsustainable levels of debt. This narrative has played a crucial role in recasting the crisis as an issue of public fi nance and competitiveness.…”