Insurance and Adjustment in a Diverse Monetary Union: what can the Eurozone learn from the UK?
Speaker(s): Professor Julia Darby, Professor Danuta Hübner MEP, Dr Alberto Montagnoli, Professor Andrés Rodríguez-Pose
Recorded on 29 January 2014 in Wolfson Theatre, New Academic Building.
A major innovation in the Four Presidents’ report is the proposal for a shock absorption mechanism that helps regions in the Euro area to adjust. This proposal is a revival of an earlier insurance device that the Commission was asked to develop in the 1990s. The stabilisation potential of such a scheme and its political viability have not been scrutinised in depth so far. It is therefore useful to draw on the experience of another heterogeneous monetary union, namely the UK. The North-South divide in terms of economic structure has been profound, leading to deindustrialisation in the North of England and housing bubbles in the South. With the benefit of hindsight, what would have been measures that could contain counterproductive dynamics such as deindustrialisation and financial overheating? How can the pooling of risks in a heterogeneous union benefit from diversity?
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