[OPE] Comments on the Eurozone

From: michael perelman <michael.perelman3@gmail.com>
Date: Wed Dec 29 2010 - 22:47:04 EST

I am commenting on a subject despite my limited knowledge. Any comments
or suggestions would be appreciated.

Robert Guttmann and Dominique Plihon have put together an
extraordinarily comprehensive analysis of Europe's single-currency
project. Even if I had some expertise in the subject, I suspect that I
would not have many criticisms. Instead, I would like to raise a few of
questions because the paper whetted my appetite for more information.

First of all, the paper tells us about the project from the perspective
of the people who were in power to make the decisions that led up to the
final arrangement. According to Thomas Sargent:

"The people who set up the euro clearly ... strove to set things up to
protect the euro from any adverse consequences ... Indeed, the whole
system was designed to force governments to balance their budgets in a
present value sense, adjusting appropriately for growth. Indeed, the
Maastricht Treaty actually put in fiscal rules that amounted to overkill
in the interests of creating a fail-safe system."

The casualties of that overkill are now obvious, but I would have liked
to learn more about voices raised against this project from the
perspective of class interests.

Sargent went further, proposing that "The euro is basically an
artificial gold standard. The fiscal rules in the Maastricht Treaty
were designed to make explicit the present-value budget balance that was
unspoken under the gold standard."

More at:


Michael Perelman
Economics Department
California State University
Chico, CA
530 898 5321
fax 530 898 5901
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Received on Wed Dec 29 22:48:55 2010

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