A Euro Area Government – A Dream Come True?

Viktor Beker — Thu, 01 Oct 2015 00:01:27 +0000

This paper studies three important problems that have led to or have aggravated the euro crisis: moral hazard in accumulating debt by sovereigns, lack of macroeconomic policy coordination and stabilization, and macroeconomic imbalances. We use both theoretical and empirical evidence to argue that these problems were largely caused by coordination problems. We will then investigate whether a supranational government, a layer of government above all euro member countries, can alleviate these problems. We will find that macroeconomic stabilization and macroeconomic imbalances can be improved by such a government, though moral hazard cannot be solved. The only, but certainly not insignificant, obstacle seems to be that politicians and voters may not be willing to transfer their authority to this government.

Parallel currencies, Varoufakis’ plan B and the ongoing debate on Euro

Viktor Beker — Thu, 01 Oct 2015 00:01:20 +0000

The last round of the Greek crisis has epitomized the European institutions nasty behavior. It has also put on the forefront the issue of the Euro. The European Monetary Union has turned into an instrument of enforcement of austerity and deflation all over the Eurozone. Its nasty consequences are going far over the Eurozone by the way. The crisis ended temporarily with an agreement that was forced upon the Greek government. It will have enduring consequences. But, in the process of this crisis have emerged the possibility of another way. What has been called Yanis Varoufakis “plan B” was an attempt to create a parallel payment system, and possibly a parallel currency. It was not intended to be a short road for Greece to return to the Drachma but it could have been so. This paper is then to study the process of this so-called “plan B” in the light of previous experiment with parallel currencies.

Euro – The European Crisis

A Euro Area Government – A Dream Come True?

Parallel currencies, Varoufakis’ plan B and the ongoing debate on Euro