In our view only there are two options for EMU 2.0: A hardening of EMU or a redrawing of the boundaries of EMU such that only countries meeting the real economy criteria for a currency union are members.
Thomas Mayer
Thomas Mayer is Chief Economist of Deutsche Bank Group and Head of Deutsche Bank Research. From 2002 to 2009 he was Chief European Economist at Deutsche Bank in London and co-head of the Bank’s Global Economics Group. Before Thomas Mayer joined Deutsche Bank in 2002, he worked for Goldman Sachs (1991-2002), and for Salomon Brothers (1990-91). Before moving to the private sector, he held positions at the International Monetary Fund (1983-1990) and at the Kiel Institute for the World Economy (1978-82). Truman Factor features Mayer's articles in English and in Spanish.
Euroland’s Hidden Balance-of-payments Crisis
Below the surface of the euro area’s public debt and banking crisis lies a balance-of-payments crisis caused by the misalignment of internal real exchange rates. The path of least resistance seems to be an appreciation in creditor countries through the inflation of goods, services and asset prices. But will the electorates in the creditor countries accept a policy of easy money and exchange rate depreciation or push an exit from EMU?
“I’m an Austrian in Economics”
We need to dump the flat-earth theories promising that economic and financial outcomes can be planned with a high degree of certainty and need to look at other theories that accept the limits of our knowledge about the future. A revival of Austrian economics could be a good start for such a research programme.
