On the Scenarios for the Future of the Eurozone

Abstract

The adoption of a common currency by several European Union countries involved multiple social and economic costs and benefits. The Sovereign Debt Crisis that struck Europe from 2009 onwards has revealed flaws and structural weaknesses in the institutional costs of the Euro, which have contributed to a set of negative systemic reactions. The insufficient coordination of fiscal and monetary policies, coupled with the absence of central supervisory mechanisms and banking resolution, has allowed the effects of the financial sector crisis to spread to the rest of the economy and between the various Eurozone countries. In this context, different scenarios have been advanced on the future of this monetary zone, which is now at a crossroads and facing challenges that require adequate socio-economic and political-institutional responses. The chapter presents and discusses the feasibility of some of the scenarios with which the Eurozone is confronted, based on the trends and fundamentals that anchor the stability of a monetary union.In particular, the conditions necessary for the favorable scenario to be presented as the most likely scenario are discussed.