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From Convergence to CrisisLabor Markets and the Instability of the Euro$
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Alison Johnston

Print publication date: 2016

Print ISBN-13: 9781501702655

Published to Cornell Scholarship Online: January 2017

DOI: 10.7591/cornell/9781501702655.001.0001

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Incomplete Monetary Union and Europe’s Current Crisis

Incomplete Monetary Union and Europe’s Current Crisis

(p.1) 1 Incomplete Monetary Union and Europe’s Current Crisis
From Convergence to Crisis

Alison Johnston

Cornell University Press

This book explores how the European Economic and Monetary Union (EMU) succumbed to the serious economic crisis it is currently in, arguing that the crisis is related to the recent rise in the external imbalances of EMU's member-states under monetary union. It attributes EMU's current crisis, and the growing external imbalances between its member-states that helped produce it, to structural flaws in the governance of labor markets that are present in EMU's institutional design. Focusing on the experiences of Denmark, Germany, Ireland, Italy, Spain, and the Netherlands, the book asks why EMU's core economies have emerged from the sovereign debt crisis with little speculative pressure. This chapter discusses inflation and wage growth convergence in Europe before the creation of the EMU and explains the origins of the crisis using the fiscal and competitive hypotheses. It also considers gaps in the competitiveness hypothesis and provides an overview of the book's structure.

Keywords:   sovereign debt crisis, European Economic and Monetary Union, economic crisis, external imbalances, labor markets, inflation, wage growth, Europe, monetary union

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