The European Monetary Union; its crisis and the prospects of non-member states : the widespread impact, lessons and transformations

Abstract

The sovereign debt crisis in the Eurozone is a symptom of policy failures and deficiencies, mainly in the fiscal policy coordination but not only. Financial deregulation and over confidence enhanced systematic risks, leads to over-borrowing by the private sector on one side and poor due diligence in lending activities by the banks on the other. EMU, apart from providing too limited remedies, it took a reactive approach to eliminate or reduce the Eurozone crisis intensity, which results in wide institutional and policy weaknesses. In the first main chapter, we establish the roots of the crisis, and highlight the main policy issues, by focusing on the main inefficiencies in the governance structure of the monetary union, and the lack of change in the supervision and regulation policies before the first signals of financial crisis appeared. In the second chapter we highlight the EMU policy addressing the fail outs till present, while also providing what the EMU needs to revise in its fiscal foundation rules that complement its common monetary policy. In the third and last part of this research, we highlight the existing and new challenges for the Non-Member States that are joining the Eurozone from January 2014 onwards. We conclude by remarking on what is next in the near future for both the Eurozone and its members and briefly answer these questions: What should be done by the EMU to have the adequate mechanisms in place in order to deal with crisis like this? Second, how fast would the EMU economy recover following these shocks?