Suchergebnisse

The paper starts by analysing the difficulties that a LDC like India and today's transforming economies face in establishing a sovereign currency in a world of established monetary economies. Monetary constitution circumscribes a process in which domestic economic agents become willing to safeguard and generate wealth in terms of the national currency in the face of competition from foreign monies and real assets. It is a prerequisite for macroeconomic stability and economic development in a more conventional sense. India did not succeed in establishing a monetary constitution. The outcome was suppressed inflation, in which microregulation was intended to act as substitute for macrostabilisation. This resulted in persistent erosion of India's monetary economy from the mid-sixties onwards. The ensuing deformations exhibit striking parallels between India today and the former planned economies of Central and Eastern Europe. In particular, a huge stock of bad debt, both of government and enterprises, is the main barrier to monetary constitution as well as more thorough reform. The most promising way of dealing with this problem of accumulated debt is considered to be a currency reform.

AbstractThe UK's negotiating position in the area of 'economic governance' started from the assumption that there is a deep dividing line between insiders and outsiders of the 'euro zone'. To protect the outsiders, the UK government did not ask for a veto, but for a safeguard mechanism that can postpone a decision in the euro area. This is exactly what David Cameron achieved in the negotiations with Council President Tusk. This article explains why the UK demands were so modest. Key is the peculiar situation of the UK being the major financial centre for a currency union to which it does not belong. Hence, the UK taxpayer needs protection from the City, and EU membership has helped to provide this. There is not much else a UK government could ask for.

Three theories or rationales can be invoked to explain the formation of the monetary union as well as its policy architecture. One sees its rationale as forming an optimal currency area, another as making macroeconomic policies credibly stability-oriented and a last one as overcoming collective action problems of mutually beneficial policy coordination. Each theory also implies an explanation for why the euro area is in crisis now. The article contains a critical assessment of these theories, with a view to how they have informed crisis management of the euro area but have also failed so far to stabilize the monetary union effectively.