Eurozone eller Farezone? - Divergens i Den Økonomiske og Monetære Union

Studenteropgave: Kandidatspeciale og HD afgangsprojekt

  • Karina Slots Pedersen
  • Patrick Egeberg Carlsen
4. semester, Samfundsøkonomi (cand.oecon), Kandidat (Kandidatuddannelse)
The purpose of the thesis ”Eurozone or danger zone – an analytical approach to divergence in the Eurozone” is to investigate the causes of lack of convergence that in recent years have been present in context of the Eurozone. The report concludes that divergence in interest rates is a consequence of differences in trust among investors caused by some Eurozone countries failing to comply with the fiscal restrictions, which according to the Maastricht Treaty and the Stability and Growth Pact, is a prerequisite for participation in the union.
Despite that a large proportion of the Eurozone countries fail to comply with these restrictions, it is nonetheless just a few of them whose interest rate experiences an increase. Spain, Italy, Portugal and Ireland are the countries who experience an increase in interest rate which leads to a fall and stagnation in GDP growth.
This leaves these economies in a particularly undesirable condition where they, in the context of stagnation in GDP growth and investments, have to reduce their public spending instead of increasing the intensity of their expansionary fiscal policy, which offsets the impact of the lack of aggregate demand. These conditions ensure countries that experience a raise in their interest rate also experience a reinforcing effect of the crisis or cycle, which worsens their financial and economic conditions.
The fiscal restrictions of both budget and debt are caused by an extensive focus on a stable development of the monetary parameters. An expansionary fiscal policy that exceeds 3 % of GDP and an increase in the debt of the country to a level beyond 60 % of GDP is to be considered undesirable in context of the Eurozone because of an increased risk of inflation.
In the context of a fall and stagnation in GDP a Keynesian approach suggests an occasionally dynamic fiscal policy. This would provide an economic development among the countries that is considered more stable due to a stable development in aggregate demand. At the same the unilateral focus on monetary parameters is considered inappropriate in the context of a high degree of macroeconomic instability.

The divergence in the development of both interest rates and GDP growth could have been avoided according to the OCA theory, in the case of either a fiscal union or the possibility for the countries to pursue an unrestricted expansionary fiscal policy. In the case of a fiscal union this would reallocate resources inside the union, while an unrestricted fiscal policy allows the countries to work against a decline in aggregate demand or an insufficient monetary policy.

Udgivelsesdato13 jun. 2016
Antal sider108
ID: 235215258