The Eurozone crisis: a balance-of-payment problem or a crisis due to a flawed monetary design?

International audienceBoth Sergio Cesaratto and I see several flaws in the setup of the common currency Eurozone, and we both understand, in a similar way, the functioning of a monetary economy. The only point of disagreement it seems to me is that Cesaratto insists that the Eurozone crisis is a balance-of-payments problem, tied to current account deficits and capital outflows. But whereas the continuous loss of foreign reserves must eventually lead to some painful adjustment, Eurozone countries can never run out of TARGET2 balances, which can take unlimited negative values, so that the evolution of the balance of payments cannot be the source of the crisis. My view, and Roberto Frenkel’s, is that investors perceived, in contrast to other central banks, that the European Central Bank by convention and by design would decline to act as the purchaser of last resort until it became too late, which explains the speculative attacks against the securities issued by the governments of the Eurozone periphery