Written by Ashley Rowles
Introduction – Whither Europe? The European Union began as the project of leaders hoping to create an economically and politically harmonized Europe. A centuries-long legacy of continental conflict and the devastation of two world wars spurred leaders to explore the possibility European integration. France and neighboring countries especially feared the resurgence of a militarily and economically potent Germany. Precluding the resurrection of a Europe divided by balance-of-power… read more.
The Crisis – Yet today economic discord threatens the much-cherished vision of a politically unified Europe. The economic institution designed to unify Europe became an instrument of political conflict. On the heels of the 2008 Lehman-Brothers banking crisis in the United States, the fault lines of the Eurozone crisis emerged. On October 16, 2009, the Greek government announced that its public debt represented approximately 10% of its GDP, later estimated at a more… read more.
Adjustment and Consequences – To restore the confidence of the world’s investors in the Euro, both IMF officials and ECB leaders pledged that Europe would defend its currency. While this entailed rescuing the highly indebted European economies, it also conditioned the receipt of financial assistance on the adoption of stringent reforms. The IMF recommended the implementation of austerity programs. The degradation of the Eurozone’s integrity was not uniquely traceable to… read more.
Solutions – As stated earlier, the Eurozone limited its capacity to weather potential crises by pursuing the politically facile hybrid of a monetary union lacking full political or fiscal integration. In attempting to redress the disparities between core and peripheral economies, policymakers placed the undue burden of adjustment on the peripheral economies, which would prolong recovery from the crisis. This section of the paper discusses policy measures that individual member economies should… read more.