Political legitimacy in a non-optimal currency area

1\. Introduction 5 2\. Performance of the Original Euro Regime 6 2.1 Centralized Monetary Policy in a Non-optimal Currency Area 7 2.2 Euro Crisis and Euro-rescue Policies 10 3\. The New Regime of Euro Governance 12 3.1 Revised Problem Perceptions and their Implications 13 3.2 From Soft Recommendations to Hardened Requirements 13 3.3 What if the New Regime Had Been in Place? 15 4\. The Euro Regime: What is Gained and What Was Lost? 17 4.1 Limited Gains 18 4.2 Instead of Nominal Devaluation, Competitive Real Devaluation 18 4.3 Obstacles to the Management of Aggregate Demand 19 4.4 Global Capitalism and Self-inflicted Helplessness 20 4.5 But Could the Regime be Patched? 20 5\. Input Legitimacy of the Present Euro Regime? 24 6\. Could Political Union Provide the Solution? 26 6.1 The Risk of Politicization 26 6.2 Legitimate Majority Rule? 28 References 30On the basis of a brief reconstruction of the causes and impacts of the Euro crisis, this paper explores, counterfactually and hypothetically, whether the new Euro regime, insisting on fiscal austerity and supply-side reforms, could have prevented the rise of the crisis or is able to deal with its disastrous economic and social impact. A comparison with the likely impact of transfer- based Keynesian reflation suggests that, in both cases, economic success is uncertain, while both approaches are likely to produce severely negative sideeffects. In light of such dismal policy choices, attempts to politicize European election campaigns are more likely to provoke unmanageable policy conflict than to overcome the input-oriented, democratic deficit of European economic governance