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Originally conceived as part of a unifying vision for Europe, the euro is now viewed as a millstone around the neck of a continent crippled by vast debts, sluggish economies, and growing populist dissent. In Europe's Orphan, leading economic commentator Martin Sandbu presents a compelling defense of the euro. He argues that rather than blaming the euro for the political and economic failures in Europe since the global financial crisis, the responsibility lies firmly on the authorities of the eurozone and its member countries. The eurozone's self-inflicted financial calamities and economic decline resulted from a toxic cocktail of unforced policy errors by bankers, politicians, and bureaucrats; the unhealthy coziness between finance and governments; and, above all, an extreme unwillingness to restructure debt.
Sandbu traces the origins of monetary union back to the desire for greater European unity after the Second World War. But the euro’s creation coincided with a credit bubble that governments chose not to rein in. Once the crisis hit, a battle of both ideas and interests led to the failure to aggressively restructure sovereign and bank debt. Ideologically informed choices set in motion dynamics that encouraged more economic mistakes and heightened political tensions within the eurozone. Sandbu concludes that the prevailing view that monetary union can only work with fiscal and political union is wrong and dangerous—and risks sending the continent into further political paralysis and economic stagnation.
Contending that the euro has been wrongfully scapegoated for the eurozone’s troubles, Europe’s Orphan charts what actually must be done for the continent to achieve an economic and political recovery.
This revised edition contains a new preface addressing the economic and political implications of Brexit, as well as updated text throughout. Europe’s Orphan charts what actually must be done for the continent to achieve a full recovery
PREFACE TO THE PAPERBACK EDITION xi
PREFACE xvii
1 A Giant Historic Mistake? 1
Spinelli's Proposition 1
Vindication of the Sceptics? 4
A Politics of Blackmail 7
The Disowned Currency 9
The Overlapping Goals of Monetary Unification 12
A Currency Designed by Economists 15
Misplaced Misgivings 17
Europe's Economic Drift 20
2 Before the Fall 25
A Honeymoon for the Single Currency 25
The Euro and the Genesis of the Crisis 28
One Size Fits None 29
The 'Export Competitiveness' Conundrum 35
The Euro's Lopsided Capital Flows 39
Losing the Printing Press 45
The Euro's Innocence 47
3 Greece and the Idolatry of Debt 48
The Promise of Europe 48
A Country Runs Out of Credit 51
The Difficulty of Putting Your Money Where Your Mouth Is 53
Three Great Morality Plays 55
The Costs of Compromise 59
Economic Tragedy 62
The Alternative That Could Not Be Named 67
An Escape from the Euro? 70
Killing Democracy in Its Cradle 73
Disenfranchisement without Respite 76
4 Ireland: The Private Is Political 80
An Interview Out of the Ordinary 80
One Letter and Six Months 82
Europe's Banking Addiction 85
Too Big to Fail 87
Pulled Down by a Helping Hand 90
Alternatives 93
Quid Pro Quo 98
Lehman Syndrome 101
5 Europe Digs Deeper 106
Doubling Down 106
Austere Solidarity: All Must Tighten 107
The Eurozone's Self-inflicted Second Downturn 110
Letting Zombie Banks Roam 116
Death by Accounting 118
Irreversibility Reversed 122
The Mutualisation Fix 126
The Tyranny of Technocracy 130
Germany's Conditions 133
The Logical Extreme 137
6 Righghting the Course: From Bail-Out to Bail-In 139
Learning from Failure 139
Accepting Default 140
Learning the Irish Lesson 144
Prising Loose a Deadly Embrace 146
Testing the Waters 149
Plunging In 150
Fiscal and Monetary Let-Up 155
Whatever It Takes 157
Lasting Injury 161
7 If Europe Dared to Write Down Debt 165
Renouncing 'There Is No Alternative' 165
A Stroll through Counterfactual History 166
Fail Early, Fail Often 168
Ending the Cult of the Sovereign Signature 173
Sovereign Contagion 177
Restructuring Politics: Dealing with Greece 181
Restructuring Politics: A Less Conflicted Europe 183
8 Europe's Real Economic Chahallenges 189
Three Tasks 189
Making the Eurozone Safe from Sudden Stops 190
Idling Europe's Economic Engine 197
A Pact Long in Need of Reform 204
Encouraging Long-term Growth 208
Unexploited Opportunities 215
9 The Politics Thahat the Euro Needs 217
Cracks in the Consensus? 217
A 'New Deal'? 217
Choosing an Alternative 221
France: The Duumvir that Abdicated 226
Germany: The Reluctance of the Hegemon 228
Insurrections 232
From Restored National Autonomy to Renewed European Integration 239
10 Great Britain or Little England? 243
The Real Choice for Britain in Europe 243
Counterfactual History: Crisis Policy with Britain in the Euro 244
Brown's Five Tests Today 251
Greater Guernsey? 260
The Euro and National Power 265
11 Remembmbering Whahat the Euro Is For 267
What Is at Stake 267
Exonerating the Euro: A Summary of the Argument 268
The Euro and Economic Strength 270
Unity in Diversity 272
NOTES 275
INDEX 307
Description
Originally conceived as part of a unifying vision for Europe, the euro is now viewed as a millstone around the neck of a continent crippled by vast debts, sluggish economies, and growing populist dissent. In Europe's Orphan, leading economic commentator Martin Sandbu presents a compelling defense of the euro. He argues that rather than blaming the euro for the political and economic failures in Europe since the global financial crisis, the responsibility lies firmly on the authorities of the eurozone and its member countries. The eurozone's self-inflicted financial calamities and economic decline resulted from a toxic cocktail of unforced policy errors by bankers, politicians, and bureaucrats; the unhealthy coziness between finance and governments; and, above all, an extreme unwillingness to restructure debt.
Sandbu traces the origins of monetary union back to the desire for greater European unity after the Second World War. But the euro’s creation coincided with a credit bubble that governments chose not to rein in. Once the crisis hit, a battle of both ideas and interests led to the failure to aggressively restructure sovereign and bank debt. Ideologically informed choices set in motion dynamics that encouraged more economic mistakes and heightened political tensions within the eurozone. Sandbu concludes that the prevailing view that monetary union can only work with fiscal and political union is wrong and dangerous—and risks sending the continent into further political paralysis and economic stagnation.
Contending that the euro has been wrongfully scapegoated for the eurozone’s troubles, Europe’s Orphan charts what actually must be done for the continent to achieve an economic and political recovery.
This revised edition contains a new preface addressing the economic and political implications of Brexit, as well as updated text throughout. Europe’s Orphan charts what actually must be done for the continent to achieve a full recovery
