TITLE:
Addressing Asymmetries in the Eurozone
AUTHORS:
Pyrros Papadimitriou, George Galanos, Thomas Poufinas
KEYWORDS:
Asymmetries in the Eurozone, Euro Crisis, Competitiveness
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.4,
April
10,
2019
ABSTRACT: Asymmetries in the Eurozone are high and the whole
undertaking is at the crossroads. On one hand, one of its countries, namely
Germany, seems to enjoy current account and budget surpluses, mainly as a
result of a strong global demand for high quality German exports, an undervalued
single currency, low interest rates, domestic wage restraint and a high
domestic saving rate. On the other hand, persistent German surpluses associated
with the not-as-good performance of the other economies make it harder for the
Eurozone as a whole to recover. The European Union (EU) has tried to create a
proper economic and banking union after the crisis. This attempt seems to have
not been fully successful for some of the countries. At the same time, the
attempts to impose austerity measures caused to a large extent an incremental
rise inskepticismin Europe. The purpose of this paper is to record the
prevailing asymmetries in the Eurozone, to estimate the priorities and the
different maximization functions of the member countries and investigate alternative
scenarios that can be followed. It is also to understand and possibly interpret
the dilemmas of the German economic policy in depth, as it is the strongest
economy in the Eurozone and hence anticipation was created that it would play
the role of the steam engine—not necessarily within Europe only. The set of
decisions that could have been taken is in the spotlight again especially due
to the fear that at least the financial markets—if not the economies as a whole—are
entering into a declining pattern again.