Péter Felcsúti on the Eurozone's major birth defect

The Eurozone has a serious birth defect, writes economist Péter Felcsúti in the online edition of the left-liberal weekly paper Magyar Narancs, in view of the ongoing crisis in the monetary union: "Everything seemed so easy at first. The introduction of the common currency, an end to the risk of exchange rate fluctuations and the associated costs. In short: the stable and cheap currency raised confidence from both an economic and a psychological perspective. This was an enormous boost not only to economic growth but also to cooperation between the members of the Eurozone. ... But the euro had a birth defect: the Monetary Union was not flanked by a fiscal union. Certainly, there were the Maastricht criteria stipulating low budget deficits. However whether countries kept to these criteria or not was only subject to half-hearted checks. ... As the global financial and economic crisis broke out in 2008, the 'hereditary sin' of the common currency quickly came to light. While some countries with disciplined economic and budgetary policy could withstand the crisis, others were incapable of following suit."

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