Abstract
The Euro as a common currency for 19 countries within the European Union was and still is a historical experiment. The traditional theory of “optimum currency area” would suggest that the project is not optimal. Perhaps the old theories have to be updated against the background of almost 20 years’ experience with the European Monetary Union (EMU). With the global financial crisis, the EMU fell in deep crisis too, coupled with a second – region specific – crisis, the Euro area crisis. This led to an almost break-up of the EMU in 2012 when it was rescued mainly by the commitment of the European Central Bank and its President Mario Draghi. At the time, a number of fundamental reforms were launched, among others the European Banking Union, the Fiscal Compact and the Macroeconomic Imbalance Procedure. Furthermore, the European Stability Mechanism (ESM) was established, soon to be renamed “European Monetary Fund”. Still, it is evident that these reforms do not suffice to make the EMU crisis-proof and welfare enhancing for all members alike. Major reforms, especially institutional reforms, are necessary but there is no consensus yet. Hence, the EMU is still a half-finished house.
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Prof. (em.) of economics at HTW Berlin – University of Applied Sciences. Senior Research Fellow at Economic Policy Institute (IMK) in Düsseldorf/Hans-Böckler-Foundation.