The Euro needs a Fiscal Union: Some Lessons from History
The creation of the euro in 1999 was a bold experiment and now runs the risk of failure. Creating a multinational monetary union with a single central bank and without a fiscal union has a lot to do with the present predicament of the eurozone. The lessons from the history of successful national monetary unions should be heeded (Bordo and Jonung 2000). Federal nations like the United States, Canada, Australia, Germany and Switzerland are examples of monetary unions combined with fiscal unions that have been successful for long periods.
The creation of the euro in 1999 was a bold experiment and now runs the risk of failure. Creating a multinational monetary union with a single central bank and without a fiscal union has a lot to do with the present predicament of the eurozone. The lessons from the history of successful national monetary unions should be heeded (Bordo and Jonung 2000). Federal nations like the United States, Canada, Australia, Germany and Switzerland are examples of monetary unions combined with fiscal unions that have been successful for long periods. However not all monetary unions with fiscal unions have been successful. Two obvious cases of failure are Argentina and Brazil (until quite recently) (Bordo, Jonung and Markiewicz 2010).
Read the full report here.
Are you interested in supporting the Manhattan Institute’s public-interest research and journalism? As a 501(c)(3) nonprofit, donations in support of MI and its scholars’ work are fully tax-deductible as provided by law (EIN #13-2912529).