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2012-09-11

They lose their capacity to issue debt in a currency over which they have full control.(Den egna sedelpressen)


A monetary union is more than just a single currency and a single central bank. Countries that join a monetary union lose more than one instrument of economic policy.

They lose their capacity to issue debt in a currency over which they have full control.

This separation of decisions – debt issuance on the one hand and monetary control on the other – creates a critical vulnerability; a loss of market confidence can unleash a self-fulfilling spiral that drives the country into default (see Kopf 2011).

Paul De Grauwe, 10 May 2011

Managing a fragile Eurozone | vox

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