Abstract
Asymmetries in the Eurozone are high and the whole undertaking is at the crossroads. On one hand, one of its countries, namely Germany, seems to enjoy current account and budget surpluses, mainly as a result of a strong global demand for high quality German exports, an undervalued single currency, low interest rates, domestic wage restraint and a high domestic saving rate. On the other hand, persistent German surpluses associated with the not-as-good performance of the other economies make it harder for the Eurozone as a whole to recover. The European Union (EU) has tried to create a proper economic and banking union after the crisis. This attempt seems to have not been fully successful for some of the countries. At the same time, the attempts to impose austerity measures caused to a large extent an incremental rise inskepticismin Europe. The purpose of this paper is to record the prevailing asymmetries in the Eurozone, to estimate the priorities and the different maximization functions of the member countries and investigate alternative scenarios that can be followed. It is also to understand and possibly interpret the dilemmas of the German economic policy in depth, as it is the strongest economy in the Eurozone and hence anticipation was created that it would play the role of the steam engine—not necessarily within Europe only. The set of decisions that could have been taken is in the spotlight again especially due to the fear that at least the financial markets—if not the economies as a whole—are entering into a declining pattern again.
Highlights
IntroductionThe countries on the periphery of the euro area (such as Greece, Spain, Portugal, and Ireland) have been in the eye of the storm of the debt crisis
The countries on the periphery of the euro area have been in the eye of the storm of the debt crisis
Asymmetries in the Eurozone are high and the whole undertaking is at the crossroads
Summary
The countries on the periphery of the euro area (such as Greece, Spain, Portugal, and Ireland) have been in the eye of the storm of the debt crisis. It should be highlighted that these imbalances, which originally created the problem, continue to feed it back combined with the question mark on the appropriateness of the remedy that was used in order to face this crisis. Such asymmetries existed even before the creation of the monetary union. The expansion to the east with countries “playing in the same league” (regarding trade competition) with the existing countries of the periphery exacerbated the problems of competitiveness that they previously had had. It was noticed that the imbalances were enlarged instead of being limited
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