F55 - International Institutional ArrangementsNávrat zpět

Advanced countries are losing their predominant position in the world economy. With the long-time productivity slowdown and the present long recession, a question arises about the threat of secular stagnation of the advanced world. In searching for the roots of this threat, leading world economistst accentuate either the demand side, or the supply side of the economy. In this respect, the authors add globalization as another important factor. Globalization has resulted in long-term global and internal imbalances, and caused deep problems in the advanced countries - deindustrialization, unemployment, growing dependence on the social safety net, and a permanent increase of government intrusion into the economy. After the 2008 crisis, fiscal and monetary policy concentrates on short-term support of economic recovery, leaving aside the deeper long-term deficiencies. With multiple negative trends acting in the same direction, the threat of secular stagnation should not be overlooked.

This paper discusses the thesis that the main danger for eurozone survival does not lie in the areas that most economists have focused on; that is, it lies neither in insufficient regulation of the financial sector (banking union) nor in fiscal irresponsibility of the European governments (fiscal compact). The eurozone technically has unlimited financial resources at its disposal to solve its recent financial problems, but the potential threats are rather of a political origin. The most important challenges are the distinct expectations that the strongest European economies harbored before the foundation of the eurozone. The French sought to gain more autonomy in the conduct of their domestic economic policy, which had been impeded by external constraints, particularly exacerbated by German monetary policy. The German goal was to prevent permanent upward pressure on their currency, which had been undermining their export-led economic model. These distinct expectations did partly influence the institutional arrangement of the Economic and Monetary Union. However, the essence of the Franco-German conflict has not been adequately addressed and we hold that the eurozone in its current setting is not able to fully resolve it. That being said, the ECB can employ means that could allow it to postpone the solution for a very long time.