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There is an alternative: A two-tier European currency community

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  • Scharpf, Fritz W.

Abstract

The performance of EMU member economies is shaped by different and structurally entrenched "growth models" whose success depends on specific macro-regimes - restrictive for export-led growth, accommodating for demand-led growth. These two types of models cannot be equally viable under a uniform macro regime, and their divergence threatens the stability of the EMU. The present attempt to enforce structural convergence in the euro¬zone appears economically ineffective and lacks democratic legitimacy on the national and the European level. Assuming that complete integration in a democratic federal state is presently unattainable, the paper presents the outline of a more flexible European Currency Community that would include a smaller and more coherent EMU and the member states of a revised "Exchange Rate Mechanism II" (ERM) whose currencies are flexibly linked to the euro. It would restore the external economic viability of autonomous domestic policy choices, and it would protect its members against speculative currency fluctuations.

Suggested Citation

  • Scharpf, Fritz W., 2018. "There is an alternative: A two-tier European currency community," MPIfG Discussion Paper 18/7, Max Planck Institute for the Study of Societies.
    • Handle: RePEc:zbw:mpifgd:187
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    Cited by:

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    2. Höpner, Martin, 2021. "Proportionality and Karlsruhe's ultra vires verdict: Ways out of constitutional pluralism?," MPIfG Discussion Paper 21/1, Max Planck Institute for the Study of Societies.
    3. Loewald, Christopher & Wörgötter, Andreas, 2019. "Do monetary unions dream of structural reforms?," ECON WPS - Working Papers in Economic Theory and Policy 01/2019, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.

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    Keywords

    autonomy; currency coordination; EMS; EMU; ERM; EU; legitimacy; Autonomie; EWS; EWU; Legitimität; Währungskoordination; WKM;
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