20.09.2018 - Studies

Political test for Europe moves closer

by Agnieszka Gehringer

More than 26 years ago, renowned economists from Germany warned against the monetary policy rules set out in the Maastricht Treaty. Accordingly, a lack of convergence of economic structures would pose a danger to Europe. Economic structures have not been aligned so far and the economy is underperforming. Like its predecessors, the new Italian government does not seek the solution by adapting outdated structures, but by stimulating demand through investment. In the process, it is dependent on European support.

In June 1992, a group of 62 renowned German economists signed a manifesto entitled "The monetary policy decisions of Maastricht: a danger for Europe".

The manifesto warned, among others, that "the economically weaker European partner countries [would] be exposed to increased competitive pressure with a common currency, as a result of which they [would] experience growing unemployment due to their lower productivity and competitiveness. High transfer payments in the sense of 'financial equalisation' [would] thus be necessary."

The economists' warnings have been confirmed. Italy in particular has refrained from adapting its economic structure to the requirements of the single currency. Instead it has allowed the economic and political malfunctions, which took place even before the introduction of the euro, to run their course.

The new Italian government is continuing the course of its predecessors and is seeking a solution not by adapting outdated structures, but by stimulating demand through investment. In doing so, it relies on European support.

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