The Logic of the Euro, Its Institutional Architecture and the Related Implications

Abstract

<p><em>The Euro is the logical consequences of the European common market according to the principle ‘one market, one money’, to avoid unfair competitionchanging internal monetary parities. Anyhow it is a necessary but insufficient condition being the institutional architecture weak. The European Central Bank cannot perform as the other main central banks: cannot act as lender of last resort or intervene on the exchange market to counteract speculation; the risks on national exchange rates has been transferred to member-countries sovereign debts withouta non-deflationary solution to reenter the excesses in theagreed ratio on GDP. The Eurozone is a non-optimal currency area without a policy Mundell’s type. The suggested solutionsby the Europeans are to reform national labor markets and public bureaucracies, and by the idealists to create a political union.</em></p>