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Europe's OrphanThe Future of the Euro and the Politics of Debt$
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Martin Sandbu

Print publication date: 2017

Print ISBN-13: 9780691175942

Published to Princeton Scholarship Online: May 2018

DOI: 10.23943/princeton/9780691175942.001.0001

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Europe’s Real Economic Challenges

Europe’s Real Economic Challenges

(p.189) Eight Europe’s Real Economic Challenges
Europe's Orphan

Martin Sandbu

Princeton University Press

This chapter defines the three main economic challenges of the members of the single currency. The first is to deal better with balance-of-payments crises — both finish the job of fixing the financial fragmentation from 2010–11 and safeguard against future ones. This is a financial and monetary task, one of ensuring that capital flows across national borders in an orderly and efficient way. The second challenge is a ‘real economy’ task of ensuring that each economy's resources are fully employed: the classic macroeconomic problem of aggregate demand management. Both of these tasks are largely about undoing self-inflicted errors. Finally, the long-run challenge is to make labour and capital as productive as they can be, which is what sustains long-term improvement in living standards.

Keywords:   economic challenges, single currency, balance-of-payments crises, financial fragmentation, aggregate demand management, labour

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