Which Future for the Euro?

The crisis of the euro became self-evident after the financial markets turmoil which took place during the summer 2007. The global financial crisis cast serious doubts about some dogmas put forward by the defenders of the libertarian capitalism, as the one on the efficiency of financial markets. Whereas in the US several episodes of bankruptcy took place within banks, in the EU the banking sector was recapitalised, fiscal measures were taken to support companies and families, and to stimulate the economy, moreover, an institutional framework was set up to improve the financial regulation and supervision. The banking and financial crisis was followed, as usual, by a debt crisis. In 2010-2011, successive European Summits accelerated the building up of financial facilities and rescue mechanisms to finance countries facing difficulties and to avoid the contagion effect. Political attention focussed on those funds, hiding the political nature of the euro crisis, and masking the exchange rate and balance of payments disequilibria in the eurozone. To correct them would require now enhanced capital transfers from the EU budget to the peripheral countries, continue internal devaluations of the peripheral countries, and start the internal revaluations in the core countries, namely in Germany.