EZ crisis and historical trilemmas | vox - 0 views
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The big difference in the EZ is that nations cannot go off the euro as they went off the gold standard
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A major part of Lenin’s analysis, for instance, was devoted to the demonstration that Russia had become a quasi-colony as a result of the large scale capital imports, and that the foreign creditors in effect controlled Russia’s foreign policy.
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The move in Europe to monetary union for weaker countries was a credibility enhancing mechanism that would lower borrowing costs. For countries that had strong creditor positions, the attractions of monetary union lay in the depoliticizing of the adjustment process (James 2012). The Eurozone worked quite well as a disciplining mechanism before it entered into effect, but much less well afterwards.
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Banking expanded after the establishment of the euro (Shin 2012). No adequate provision on a European basis existed for banking supervision and regulation, which like fiscal policy, was left to rather diverse national authorities. An explosion of banking activity occurred simultaneously with the transition to monetary union and may well have been stimulated by the new single money.
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The implicit national government backstop was really only credible because of the international commitment to the European integration project. It was that commitment that led markets to believe that – in spite of the no bailout provisions of the Maastricht Treaty – there were almost no limits to the amount to which debt levels could accumulate both in the private and the public sector.
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When the democratic/popular backlash occurs, it takes the form of rejection of international/cross-border political commitment mechanism.
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Opinion poll data shows a major increase in hostility to the EU in peripheral countries, but with no corresponding unpopularity of the common currency.