In This Review

Europe's Unfinished Currency: The Political Economics of the Euro (Anthem Finance)
Europe's Unfinished Currency: The Political Economics of the Euro (Anthem Finance)
By Thomas Mayer
Anthem Press, 2012, 200 pp

Debates over the future of the eurozone have become polarized around two unrealistic alternatives: the formation of a political union and the breakup of the eurozone. Mayer suggests a middle path, arguing that European governments must avoid unlimited commitments to fiscal transfers and centralized control in favor of limited cooperation to construct a minimal regulatory framework. The European Union should move toward creating a banking union, he argues, in which the European Central Bank would increase its role in banking supervision and act as a lender of last resort to banks troubled by liquidity problems. Yet the EU cannot and should not handle its member states‚ fundamental solvency issues, particularly their sovereign debts, not only because the EU lacks a democratic mandate but also because this would undermine the European Central Bank's proper goal of price stability. One implication of Mayer's argument is that the eurozone is likely to shrink and some national currencies will likely reemerge in Europe. In Germany, with its emphasis on financial rectitude and price stability, this view is widely held, although mostly behind closed doors. Given Berlin's key role in European monetary decision-making, this vision is probably more realistic than other, more widely discussed scenarios.