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What difference does Euro membership make to stabilization?: the political economy of international monetary systems revisited

Mabbett, Deborah and Schelkle, Waltraud (2015) What difference does Euro membership make to stabilization?: the political economy of international monetary systems revisited. Review of International Political Economy, 22 (3). pp. 508-534. ISSN 0969-2290

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Identification Number: 10.1080/09692290.2014.916625

Abstract

For many political economists, the loss of monetary sovereignty is the major reason why the Southern periphery fared so badly in the Euro area crisis. Monetary sovereignty here means the ability of the central bank to devalue the exchange rate or to buy government debt by printing the domestic currency. We explore this diagnosis by comparing three countries – Hungary, Latvia and Greece – that received considerable amounts of external assistance under different monetary regimes. The evidence does not suggest that monetary sovereignty helped Hungary and Latvia to stabilize their economies. Rather, cooperation and external assistance made foreign banks share in the costs of stabilization. By contrast, the provision of liquidity by the European Central Bank inadvertently facilitated the reduction of foreign banks’ exposure to Greece which left the Greek sovereign even more exposed. By viewing the Euro area as a monetary system rather than an incomplete state, we see that what is needed for Euro area stabilization is cooperation over banking union, rather than a fully-fledged federal budget.

Item Type: Article
Official URL: http://www.tandfonline.com/loi/rrip20
Additional Information: © 2014 Taylor & Francis
Divisions: European Institute
Subjects: J Political Science > JN Political institutions (Europe)
Sets: Departments > European Institute
Date Deposited: 21 Apr 2015 13:48
Last Modified: 20 Sep 2019 01:59
URI: http://eprints.lse.ac.uk/id/eprint/61670

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