1. Creating a Eurozone that works
Joseph Stiglitz
Creating a Eurozone that works
Harry Fox

2. Intro Europe is unsustainable, it’s a “halfway house”
Policy and Structure Reforms
Economic reforms

3. Structural Reforms 1. A Banking Union 2. Mutualization of Debt
3. A Common Framework for Stability
4. A True Convergence Policy – Toward Structural Realignment
5. A Eurozone Structure that promotes full employment and growth for all of Europe – Macroeconomics
6. Structural Reforms of the Eurozone to ensure full employment and growth for all of Europe
7. A Commitment to shared prosperity

4. 1. A Banking Union A common banking system
Common regulations,
Deposit insurance,
And resolution
Most important is a common deposit insurance fund
Provide flexibility to those ”weak” countries

5. 2. Mutualization of Debt Create a Eurobond
Lower interests rates could be implied leading to lower debt defaults
Limiting the movement of capital

6. 3. A Common Framework for Stability
The movement from current automatic destabilizers to automatic stabilizers
Six parts to stability reform
Common fiscal framework – “stringent budgetary rules”
Solidarity fund for stabilization – unemployment insurance, money to the workers and small business
Automatic stabilizers
Flexibility in credit creation
Regulating the economy to prevent excesses – prevent “bubbles”
Stabilizing fiscal policies - “fiscal policy, directed at needed investments, needs to be put more in the center of macro- stabilization”

7. 4. A True Convergence Policy – Toward Structural Realignment
Misalignment of rates of growth covered by the common exchange rate.
1. The need to discourage surpluses – convergence policy needed
Trade deficits lead to risks of instability
Current account balance and equilibrium
2. Expansionary wage and fiscal policies in surplus countries
Minimum wages need to be increased and/or leveled
3. reversing the other divergence policies
Industrial improvements

8. 5. A Eurozone Structure that promotes full employment and growth for all of Europe – Macroeconomics
Change the mandate of the European Central Bank
More credit to the medium and small size enterprises

9. 6. Structural Reforms of the Eurozone to ensure full employment and growth for all of Europe
1. Making the financial system serve society
Recycling the savings, “intermediation”
2. Reforming corporate governance
“short-term myopia”
3. A super-chapter 11 for bankruptcy
The absence of one in the EU
4. Promoting environmental investments
Sustainable environment
Prices on carbon emissions

10. 7. A Commitment to shared prosperity
The increase in inequality
The need for the EU to create a true stability
Tax control
Race to the bottom
Citizen based taxes

11. Reforms in crisis policy
Importance of discretion and flexibility
1. From austerity to growth
Recognizing the limits of monetary policy
Recognizing the principle of the balance-budget multiplier
2. Toward debt restructuring
High debt leads to stranglehold on potential growth for a economy

12. Conclusion It can be done! Full employment
Find economic equilibrium, shared prosperity
Provide credit for small and medium size enterprise (ECB)