How to Fix the Euro Area? Poison and Remedy: the Roots of the Crisis and New Institutional Solutions
The objectives of this chapter relate to three main issues: firstly, identification of the main weaknesses of the euro area mechanisms which led to the crisis; secondly, an assessment of the introduced and proposed reforms; and thirdly, a proposal for the optimum institutional model of the euro area in the future.
The main findings from a review of the literature indicate that the euro introduction was based on incorrect assumptions, which led to real and nominal divergence between countries despite expected convergence. Moreover, the economic and financial crisis exposed the degree to which the euro area was an incomplete monetary union due to insufficient stabilisation instruments and a low level of solidarity between countries.
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