Forced Structural Convergence in the Eurozone – Or a Differentiated European Monetary Community

Eight years after the onset of the “Great Recession,” the eurozone is deeply split between “Northern” EMU economies that seem to be doing reasonably well and “Southern” countries that continue to struggle with socioeconomic catastrophe. This paper argues that the continuing malaise is a consequence of the structural diversity among Northern and Southern economies and of an asymmetrical euro regime that must try to enforce the structural convergence of their political economies. The present regime is vulnerable, however. It may fail economically should its rules have to be relaxed, and it may fail politically should it no longer be possible to suppress North–South conflicts. In light of these risks, the paper concludes by presenting the outline of a differentiated European Currency Community that would accommodate structurally diverse but highly interdependent economies in a flexible two-level regime.Acht Jahre nach dem Beginn der „Großen Rezession“ ist die Eurozone tief gespalten zwischen Ländern, welche die Krise erfolgreich überwunden haben, und anderen, die nach wie vor mit deren katastrophalen Folgen zu kämpfen haben. Der Grund sind fundamentale Strukturunterschiede zwischen „nördlichen“ und „südlichen“ Mitgliedsökonomien und ein einheitliches Euro-Regime, das strukturelle Konvergenz erzwingen muss, um die Stabilität der Währungsunion zu sichern. Dieses Regime kann jedoch ökonomisch scheitern, wenn seine strikten Regeln gelockert werden müssten, und es kann politisch scheitern, wenn es nicht länger gelingen sollte, den potenziell explosiven Nord-Süd-Konflikt zu unterdrücken. Angesichts dieser Risiken skizziert das Papier am Ende das Konzept einer flexiblen Europäischen Währungsgemeinschaft für strukturell unterschiedliche, aber wirtschaftlich eng verflochtene europäische Wirtschaften.1 Introduction 2 The Monetary Union: Failure of an asymmetric regime The EMU destroys existing governing capacities The euro regime: Convergence through austerity and supply-side reforms Structural differences of Northern and Southern political economies The asymmetric impact of the present euro regime 3 The political economy of forced convergence Forced convergence may work Is the prize worth winning? 4 A disaster of political legitimacy Legitimacy on the national level Legitimacy on the European level The specter of politicization 5 Searching for more symmetric modifications of the present regime Back to no bail-out rules? Forward to the transfer union? Reducing Northern surpluses 6 Differentiated monetary integration in a European Currency Community Rules for state insolvency and “amicable divorce” Learning from the faults of the EMS Toward a two-level European Currency Community Assistance in transition 7 Conclusion Reference