G.E. Krimpas: The Recycling Problem in a Currency Union
Dept. of Economics, University of Athens and UADPhilEcon.
Abstract. The recycling problem is general, not confined to a multicurrency setting: whenever there are surplus and deficit units, i.e. everywhere, adjustment in real terms can be either upward or downward, the question is which. An attempt is made to formulate the problem in terms of EMU. While the problem seems clear the resolution is not. It is proposed to engage the issue through a detour consistent with the Maastricht rules. Inadequate as this is, it highlights the limits of technical arrangements when confronted with political economy, viz. the inability to set the rules of the game from within a set of axiomatically predetermined rules dependent on the fact and practice of sovereignty. Even so, an attempt at persuasion through clarification of the issues may be a useful preliminary, in particular by highlighting the distinction between recycling and transfers. Some of the paper’s evocations, notably on ‘oligopoly’, may be taken as merely heuristic. The present is adraft for discussion and comment.
February, 1st 2010