Research Topics
Publications on Fiscal union
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Making the Euro Viable
Working Paper No. 842 | July 2015The Euro Treasury Plan
The euro crisis remains unresolved and the euro currency union incomplete and extraordinarily vulnerable. The euro regime’s essential flaw and ultimate source of vulnerability is the decoupling of central bank and treasury institutions in the euro currency union. We propose a “Euro Treasury” scheme to properly fix the regime and resolve the euro crisis. This scheme would establish a rudimentary fiscal union that is not a transfer union. The core idea is to create a Euro Treasury as a vehicle to pool future eurozone public investment spending and to have it funded by proper eurozone treasury securities. The Euro Treasury could fulfill a number of additional purposes while operating mainly on the basis of a strict rule. The plan would also provide a much-needed fiscal boost to recovery and foster a more benign intra-area rebalancing.
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Lost at Sea
Working Paper No. 780 | November 2013The Euro Needs a Euro Treasury
The euro crisis remains unresolved even as financial markets may seem calm for now. The current euro regime is inherently flawed, and recent reforms have failed to turn this dysfunctional regime into a viable one. Our investigation is informed by the “cartalist” critique of traditional “optimum currency area” theory (Goodhart 1998). Various proposals to rescue the euro are assessed and found lacking. A “Euro Treasury” scheme operating on a strict rule and specifically designed not to be a transfer union is proposed here as a condition sine qua non for healing the euro’s potentially fatal birth defects. The Euro Treasury proposed here is the missing element that will mend the current fiscal regime, which is unworkable without it. The proposed scheme would end the currently unfolding euro calamity by switching policy from a public thrift campaign that can only impoverish Europe to a public investment campaign designed to secure Europe’s future. No mutualization of existing national public debts is involved. Instead, the Euro Treasury is established as a means to pool eurozone public investment spending and have it funded by proper eurozone treasury securities.
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