publication

EMU: old flaws revisited

Authors:
Charles WYPLOSZ
Francesco GIAVAZZI
2015

Economic and monetary union (EMU) started with serious flaws. Those flaws had been carefully diagnosed and yet no attempts were made to deal with them. As an original experiment, it would have been extraordinary that its design be perfect from the start. The fact that these flaws came together to generate the euro-area crisis is an indictment of the denial that has characterized the first decade of the monetary union. The costs of this denial have been enormous, including lost incomes, unemployment, bankruptcies, and dangerous political under-currents. We revisit three main flaws: the lack of planning to deal with financial instability, the lack of transparency of the ECB, and the poor articulation between monetary policy and national fiscal policies.