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Transcript
Behind the scenes:
- Euro as a political poject, no voice
of consumer
- Single currency as a mean towards
single state
- No political nation
- Maastricht criteria for german
taxpayer - EA always in deficit
- No optimal currecny zone
- Entry cheating
Debt of
- Portugal
- Greece
- Ireland
represent 7% of EU debt
Debt of
- PIIGS
represent 32% of EU debt
Positives of EA membership:
- Limited FX risk
- Lower costs of capital
- Lower transaction costs
- Higher price transparency
- International trade growth
- Higher FDI
- convergence, living standard
- Maastricht critera
Why not to join EA:
- costs of entry 0,3-0,8% GDP
- loss of banking sector
- loss of monetary independency - lack
of monetary competition - 1% share
- fiscal free riding
- risk of higher inflation
- group game costs
- convergence possible only through
- higher price level
Conclusion
EURO project
- disclosed the limits of political projects
- money creation is the most favorite political tool
- fiscal free riding leads to fiscal harmonisation
- no public opinion neede to save the currency
- loss of public control
- risk of high, or hyperinflation
- world inflation coordination
European Redistribution Disaster
(Tragedy of Euro)
radovan.durana@iness.sk
www.iness.sk, www.eurocrisis.sk
Euro Illusions vs. Reality
Bad banks or governments?
Hit me!
At WWII debt level
What can we expect:
ECB solution
risk of high inflation
unification, federalization
All you can save ESM
EFSF bigger
EFSF
Alternative:
- allow competition,
- let consumers vote