THE EUROPEAN MONETARY INTEGRATION TRAP: INCOMPLETE SOVEREIGNTY AND THE STATE-MIMICKING METHOD
Abstract
The author identifies the two main (external and internal) dimensions of incomplete sovereignty in the EMU and the respective caveats affecting the scope of the single monetary policy, here described as a ‘monetary policy integration trap’. The author details the main implications caused by this curtailed sovereignty both in its external and internal dimensions – e.g. on the one hand, the polarisation of external positions and, on the other hand, the effects of limited European fiscal/budgetary sovereignty and the atypical interaction between the latter and the single monetary policy. Finally, the way the E(M)U has in recent years addressed this integration trap is analysed, making use of a heterodox method here labelled as the ‘State-mimicking’ method. The main conclusion is that such a method is the possible yet imperfect policy solution to bypass the monetary policy integration trap, given the E(M)U’s ontological ambiguities - a quasi-State afraid to become one.
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[2] Baldwin, R. et al. 2015. Rebooting the Eurozone: Step I – agreeing a crisis narrative, CEPR Policy Insight No. 85. Available at: https://voxeu.org/sites/default/files/file/Policy%20Insight%2085.pdf
[3] Bardutzky, S. and Fahey, E. 2014. Who Got to Adjudicate the EU’s Financial Crisis and Why? Judicial Review of the Legal Instruments of the Eurozone, Maurice Adams et al. (Eds), The Constitutionalization of European Budgetary Constraints, Hart Publishing: Oxford, and Portland, Oregon, pp. 341-358.
[4] Bartsch, E. et al. 2020. It’s all in the mix – How monetary and fiscal policies can work or fail together, Centre for Economic and Policy Research, Geneva Reports on the World Economy, 23.
[5] Beetsma, R. and Kopits, G. 2020. Designing a Permanent EU-Wide Stabilization Facility, CEsifo Working Papers, 8735. Available at: https://www.cesifo.org/en/publikationen/2020/working-paper/designing-permanent-eu-wide-stabilization-facility
[6] Begg, I. 2009. Fiscal Federalism, Subsidiarity and the EU Budget Review. SIEPS, Swedish Institute for European Policy Studies, Report No 1, Stockholm.
[7] Begg, I. 2012. Breaking the shackles of austerity? Using the EU budget to achieve macroeconomic stabilization. Available at: https://library.fes.de/pdf-files/id/09450.pdf
[8] Bénassy-Quéré, A. 2015. Maastricht flaws and remedies. Richard Baldwin & Francesco Giavazzi (eds.), The Eurozone Crisis: A Consensus View of the Causes and a Few Possible Solutions, A VoxEU.org Book, CEPR Press: London, pp. 71-83.
[9] Bénassy-Quéré, A. and Wolff, M. 2020. How has the macro-economic imbalances procedure worked in practice to improve the resilience of the euro area?, European Parliament: Brussels.
[10] Bijlsma, I. and Lukkezen, J. 2012. Target 2 of the ECB vs. Interdistrict Settlement Account of the Federal Reserve. Available at: https://www.bruegel.org/2012/03/target-2-of-the-ecb-vs-interdistrict-settlement-account-of-the-federal-reserve/
[11] Blyth, M. 2013. Austerity – The History of a Dangerous Idea, Oxford University Press: Oxford & New York.
[12] Brunnermeier, M. K. et al. 2012. European Safe Bonds (ESBIes). Available at: http://personal.lse.ac.uk/vayanos/euronomics/esbies.pdf
[13] Buiter, W. and Rahbari, E. 2012. Target 2 redux: The simple accountancy and slightly more complex economics of Bundesbank loss exposure through the Eurosystem. CEPR Discussion Paper 9211.
[14] Cabral, N. C. 2021a. The European Monetary Union after the Crisis – From a Fiscal Union to a Fiscal Capacity, Routledge: London & New York.
[15] Cabral, N. C. 2021b. Borrowing in the European Union: from a pure national model to the antechamber of a European fiscal federal solution. Journal of European Integration, DOI:https://doi.org/10.1080/070
[16] Cabral, N. C. 2021c. Disjointed sovereignties in the European Union and atypical interactions between monetary and fiscal policies. CIDEEFF Working Paper no. 1/2021. Available at: https://www.cideeff.pt/pt/publicacoes/working-papers/Disjointed-Sovereignties-in-the-European-Union-and-atypical-interactions-between-monetary-and/5144/.
[17] Cipriani, G. 2014. Financing the EU Budget – Moving forward or backwards?, CEPS: London.
[18] De Grauwe, P. & Moesen, W. 2009. Gains for all: Proposal for a common Eurobond. Available at: https://www.ceps.eu/ceps-publications/gains-all-proposal-common-eurobond/
[19] De Grauwe, P. 2011. “The Governance of a Fragile Eurozone”, CEPS Working Document, No. 346. Available at: https://www.ceps.eu/system/files/book/2011/05/WD%20346%20De%20Grauwe%20on%20Eurozone%20Governance.pdf
[20] De Grauwe, P. 2014. Economics of Monetary Union, 10th Ed., Oxford University Press: Oxford.
[21] Frankel, J. 1999. No single currency regime is right for all countries or at all times, Essays in International Finance, ns. 215, August 1999. DOI: 10.3386/w7338
[22] Gräbner, C., Heimberger, P. and Kapeller, J. 2020. Is the Eurozone disintegrating? Macroeconomic divergence, structural polarization, trade and fragility. Cambridge Journal of Economics, 2019: 1-23.
[23] Haldane, A.G. 1991. The exchange rate mechanism of the European monetary system: a review of literature. Bank of England Quarterly Bulletin, February: 73-80. https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/1991/the-exchange-rate-mechanism-of-the-european-monetary-system-a-review-of-the-literature.pdf
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[25] Kapeller, J., Gräbner, C. and Heimberger, P. 2019. Economic polarisation in Europe: Causes and policy options. Ifso Working Paper No. 5. University of Duisburg-Essen.
[26] Krugman, P. 1991. Increasing Returns and Economic Geography. The Journal of Political Economy, 99(3): 483-499. https://pr.princeton.edu/pictures/g-k/krugman/krugman-increasing_returns_1991.pdf
[27] Lane, P. R. 2006. The real effects of the European Monetary Union. Journal of Economic Perspectives, 20(4): 47-66. DOI: 10.1257/jep.20.4.47
[28] Lindseth, P.L. 2014. Power and Legitimacy in the Eurozone: Can Integration and Democracy be Reconciled?, Maurice Adams et al. (eds), The Constitutionalization of European Budgetary Constraints, Hart Publishing: Oxford, and Portland, Oregon, pp. 379-398.
[29] McNamara, K. R. 2015. The Forgotten Problem of Embeddedness, Matthias Matthijs and Mark Blyth (Eds.), The future of the Euro, Oxford University Press: Oxford, pp. 21-45.
[30] Milesi-Ferreti, G. M. and Tille, C. 2011. The Great Retrenchment: International Capital Flows during the Global Financial Crisis. Economic Policy 26(66): 285-342. DOI: https://doi.org/10.1111/j.1468-0327.2011.00263.x
[31] Puga, D. and Venales, A. 1996. The Spread of Industry: Spatial Agglomeration in Economic Development. Journal of Japanese and International Economies, 10(4): 440-464. DOI:https://doi.org/10.1006/jjie.1996.0025
[32] Rossi, S. 2017. A Structural-Reform Proposal for a Two-Speed Monetary Union, Cabral, N.C., Gonçalves, J.R.& Rodrigues, N.C. (eds.), The Euro and the Crisis – Perspectives for the Eurozone as a Monetary and Budgetary Union, Springer, pp. 33-46.
[33] Schelkle, W. 2017. The Political Economy of Monetary Solidarity – Understanding the Euro experiment, Oxford University Press: Oxford.
[34] Schelkle, W. 2021. Fiscal Integration in an Experimental Union: How Path-Breaking Was the EU’s Response to the COVID-19 Pandemic?. Journal of Common Market Studies, 2021: 1-12. DOI:https://doi.org/10.1111/jcms.13246
[35] Stiglitz, J. 2016. The Euro – How a Common Currency Threatens the Future of Europe, W.W. Norton & Company: New York and London.
[36] Zurlinden, M. 1993. The Vulnerability of Pegged Exchange Rates: The British Pound in the ERM. Federal Reserve Bank of St. Louis, September/October 1993, pp. 41-56.
[37] European Commission (2017). Feasibility and Added Value of a European Unemployment Benefit Scheme – Main findings from a comprehensive research project, European Commission: Brussels.
[38] European Commission (2022). Cohesion in Europe towards 2050 - Eighth report on economic, social and territorial cohesion, European Commission: Brussels.
Published
2022-12-31
How to Cite
CABRAL, Nazaré da Costa.
THE EUROPEAN MONETARY INTEGRATION TRAP: INCOMPLETE SOVEREIGNTY AND THE STATE-MIMICKING METHOD.
Theoretical and Practical Research in Economic Fields, [S.l.], v. 13, n. 2, p. 167 - 179, dec. 2022.
ISSN 2068-7710.
Available at: <https://journals.aserspublishing.eu/tpref/article/view/7470>. Date accessed: 02 jan. 2025.
doi: https://doi.org/10.14505/tpref.v13.2(26).06.
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