How Europe's New Gold Standard Undermines Democracy
While the whole world has been adopting a pragmatic consensus on economic policy since the Great Recession, Europe — and Germany in particular — is stubbornly sticking to a policy that has all the downsides of the old classical gold standard.
From the US to Russia and Japan, and from Brazil to India and China, the rest of the world has been careful to preserve substantial flexibility with its domestic fiscal and monetary policy levers. No such caution in continental Europe, where a "one size fits none" monetary policy by an independent central bank that cannot act as a true lender of last resort and a Brussels-imposed fiscal straightjacket that has not served a single euro member state well reign the day. Add to that the problem of intra-European financial markets with "national" regulatory institutions and the lack of a Europe-wide deposit insurance scheme or common debt instrument, and one can start to understand why the euro zone is going through an existential crisis with still no real end in sight.
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Matthias Matthijs is Assistant Professor of International Political Economy at Johns Hopkins University’s School of Advanced International Studies (SAIS).