The Great Recession of 2012–2014: The Monetary Union Challenged by National Egoisms

Abstract

Eight years after the outbreak of the financial crisis, while the United States have for several years emerged from recession, Europe, after a long recession whose only precedent is the 30s deflation, has barely recovered the level of GDP per capita that existed before the 2008 crisis. The argument developed in this article is that this crisis is inherent to a monetary union which has failed to build the political institutions necessary for its functioning. Coordination through rules is not enough. Without an ``economic government{''} able to set up a discretionary coordination of fiscal policy, the monetary union has been unable to implement a policy mix suitable for the whole euro area and let deflationary policies develop, pushing the whole of Europe into depression.