Summary of Flexibility versus Stability

A Difficult Trade-Off in the Eurozone

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Flexibility versus Stability summary
The approach to solving the euro zone’s economic problems may be all wrong.

Rating

8 Overall

8 Importance

9 Innovation

7 Style

Recommendation

The euro zone faces considerable economic and monetary pressures as the bloc recovers from the lingering effects of the financial and sovereign debt crises. European Union policy makers have exhorted struggling euro members to implement structural reforms in labor and product markets, according to the prescriptions of the economic theory on optimal currency areas. However, economists Paul De Grauwe and Yuemei Ji argue that those prescriptions may not apply to the economic and fiscal issues facing the euro zone. getAbstract recommends this timely and astute analysis of European policy options to economists, policy makers and analysts.

In this summary, you will learn

  • What implications optimal currency area theory has for the euro zone
  • How imposing only structural reforms may not be appropriate for struggling euro-zone economies
  • What tools could help spur economic resilience
 

Summary

To tackle slow growth, high unemployment and fiscal weakness, policy makers in the euro area are promoting structural reforms to add more flexibility to national labor and product markets. Euro-zone countries have adopted these moves, which include lessening employment safeguards, more quickly than ...
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About the Authors

Paul de Grauwe is a professor of international economics at the London School of Economics. Yuemei Ji is a lecturer at University College London.


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