This paper considers the increase in the Euro intra-area imbalances since the late 1990s and their role in the current European debt crisis. By focusing on the case study of Italy and Germany, we argue that both macroeconomic (the functioning of the euro area) and microeconomic (internationalization of production) factors contributed to the creation of such imbalances. When sovereign risk and currency risk emerged in the periphery, coupled with austerity as a response to these risks, both factors made the euro crisis worse. The present zero-sum-game approach is very risky for the stability of the euro area. Policy coordination of some kind is needed. This requires agreeing on well-identified economic policy priorities, taking full account of the different positions of the members in terms of growth, external imbalances, and competitiveness. New policy priorities are thus required in the euro zone that put more emphasis on cooperative (positive-sum) games in convergence and competitiveness. © The Authors 2013. Published by Oxford University Press.

Intra-European imbalances, adjustment, and growth in the eurozone

Piero Esposito;
2012-01-01

Abstract

This paper considers the increase in the Euro intra-area imbalances since the late 1990s and their role in the current European debt crisis. By focusing on the case study of Italy and Germany, we argue that both macroeconomic (the functioning of the euro area) and microeconomic (internationalization of production) factors contributed to the creation of such imbalances. When sovereign risk and currency risk emerged in the periphery, coupled with austerity as a response to these risks, both factors made the euro crisis worse. The present zero-sum-game approach is very risky for the stability of the euro area. Policy coordination of some kind is needed. This requires agreeing on well-identified economic policy priorities, taking full account of the different positions of the members in terms of growth, external imbalances, and competitiveness. New policy priorities are thus required in the euro zone that put more emphasis on cooperative (positive-sum) games in convergence and competitiveness. © The Authors 2013. Published by Oxford University Press.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11580/79339
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 19
social impact