Sovereignty, the exchange rate, collective deceit, and the euro crisis

Abstract

This paper presents an interpretation of the European crisis based on balance-of-payments imbalances within the Eurozone, highlighting the role of the internal real exchange rates as a primary cause of the crisis. It explores the structural contradictions that turn the euro into a foreign currency for each individual Eurozone country. These contradictions imply the inability of national central banks to monetize the public and private debts, which makes the euro crisis a sovereign crisis similar to those typical of emerging countries, but whose solution presents additional obstacles.