The Euro Must Be Abandoned to Achieve European Monetary Integration

Abstract

This article explains why the euro has to be abandoned in order to integrate the euro-area member countries monetarily. It first recalls the negative consequences of the adoption of a single European currency by a number of countries whose economies are still too different on structural grounds to support the financial constraints elicited by the fiscal and monetary policy straightjacket. It thus points out the lack of fiscal transfers between these countries and the dogmatic attitude of the ECB regarding its own policy strategy and objectives, both of which affect the (un)employment level as well as the degree of financial (in)stability across the euro area. The article then suggests a way out of this area for those countries whose population cannot support the burden imposed by austerity policies with no foreseeable positive effect for the large majority of the people. It thus proposes the reintroduction of national currencies in these countries, for which the euro will still be available but as a mere supranational currency used by their national central banks only, in order for them to settle international trade and financial-market transactions carried out by residents in their countries. This monetary–structural reform will increase financial stability and employment levels across Europe, thereby also inducing positive effects for public finance.