EMU: An Italian perspective

Rainer Masera


The paper offers an Italian perspective on the creation and evolution of the European Economic and Monetary Union (EMU), which were and continue to be politically driven processes. European political leaders were responsible not for design defects but for a fundamental fault in execution: an original sin that continues to undermine the workings of the EMU. Contrary to commonly held beliefs, the Maastricht criteria and a rapid convergence process towards political union as the counterpart to the EMU were a viable framework. This consistent time path was not respected when the euro was created: the participation of Italy in 1999 and of Greece in 2001 did not satisfy the condition of prior fundamental convergence, notably in terms of public finance. The currency without a state, the lack of adjustment, and insufficient structural reforms imparted a deflationary bias, heightened the risks of the sovereign/bank nexus, and led to a wrong policy mix. In spite of significant steps to correct the system, current flaws continue to represent a major drawback to improving the resilience of the system.

JEL codes: E42, E52, E61, F33, F34, F45, H63


Economic and Monetary Union, policy mix, Target2 balances, Euroexit

Full Text:



Amato G. (2018), “Alle Regioni la programmazione del nostro futuro”, Corriere della Calabria, 15 November.

Angelini P., Grande G. and Panetta F. (2014), “The Negative Feedback Loop between Banks and Sovereigns”, Questioni di Economia e Finanza Occasional Paper, no. 213, Rome: Banca d’Italia.

Asonuma T. and Trebesch C. (2016), “Sovereign Debt Restructurings: Preemptive or Post-Default”, Journal of the European Economic Association, 14 (1), pp. 175-214.

Baffi P. (1989), “From Einaudi to Delors and beyond, Judiciously”, in Paolo Baffi 5 agosto 1911-4 agosto 1989, Roma: Ente per gli studi monetari, bancari e finanziari «Luigi Einaudi», pp. 50-58.

Balassone F. and Visco I. (2018), “The Economic and Monetary Union: Time to Break the Deadlock”, Banca d’Italia, available at /17122018-ViscoBalassone_EMU-Time-Break.pdf.

Banca d’Italia (2017), “I saldi Target 2 e i movimenti dei capitali”, 15 June, available at: https://www.bancaditalia.it/media/views/2017/target2/I-saldi-TARGET2-e-i-movimenti-dei-capitali.pdf.

Bardozzetti A. and Dottori D. (2013), “Collective Action Clauses: How Do They Weigh on Sovereigns?”, Banca d’Italia Working Papers, no. 897, January, Rome: Banca d’Italia.

Centeno M. (2018), “Remarks Following the Eurogroup Meeting of 19 November 2018”, Statements and Remarks, no. 663/18, Brussels: Press Office General Secretariat of the Council of the Eu, available at: http://www.astrid-online.it/static/upload/cent/centeno_eurogroup-19-11-18.pdf.

Claeys G. (2018), “Are SBBS Really the Safe Asset the Euro Area Is Looking for?”, bruegel.org, 28 May, online, available at: http://bruegel.org/2018/05/are-sbbs-really-the-safe-asset-the-euro-area-is-looking-for/.

Council of the European Union (2012), “Treaty on Stability, Coordination and Governance in the Economic and Monetary Union”, Brussels.

De Grauwe P., Yuemei J.I. and Macchiarelli C. (2017), “Target (Im-)balances at Record Level: Should We Worry?”, November, Brussels: European Parliament, Policy Department A, available at: http://www.europarl.europa.eu/cmsdata/131943/MD%20LSE%20formatted_FINAL%20publication.pdf .

de Larosière J. (2013), “The Trade-Off between Bank Regulation and Economic Growth”, Central Banking, 28 February.

Delors J. (1989), “Report on Economic and Monetary Union in the European Community” (commonly called the Delors Plan or Report), Eu Commission Working Document, 17 April.

Deutsche Bundesbank (2011), “Bundesbank TARGET2 balances”, press release, 22 February, available at: https://www.bundesbank.de/en/press/press-releases/bundesbank-target2-balances-670328.

Domar E. (1944), “The Burden of the Debt and the National Income”, American Economic Review, 34 (4), pp. 798-827.

Draghi M. (2012), “Letter from ECB President to Mr. Claudio Morganti, MEP”, 6 November, Frankfurt: European Central Bank, available at: https://www.ecb.europa.eu/pub/pdf/other/20121107_morganti.en.pdf.

Draghi M. (2012), “Speech by Mario Draghi, President of the European Central Bank at the Global Investment Conference”, London, 26 July, available at: https://www.ecb.europa.eu/press/key/date/2012/html /sp120726.en.html.

Draghi M. (2017), “Letter from the ECB President to Mr Marco Valli and Mr Marco Zanni, MEPs, on TARGET2 Operations”, 18 January, Frankfurt: European Central Bank, available at: https://www.ecb.europa.eu/pub/pdf/other/170120letter_valli_zanni.en.pdf.

Draghi M. (2018), “Letter from the ECB President to Mr Joachim Starbatty and Ms Ulrike Trebesius, MEP, on TARGET2”, 12 September, Frankfurt: European Central Bank, available at: https://www.ecb.europa.eu/pub /pdf/other/ecb.mepletter180914_Starbatty_Trebesius.en.pdf.

EC – European Commission (2012), “Current Account Surpluses in the EU”, European Economy, no. 9/2012, Brussels: European Commission.

EC – European Commission (2017), “Proposal for a Council Regulation on the Establishment of the European Monetary Fund”, COM(2017)827/956250.

ECB – European Central Bank (2012), “Technical Features of Outright Monetary Transactions”, 6 September, Frankfurt: European Central Bank, available at: https://www.ecb.europa.eu/press/pr/date/2012/html/pr120906_1.en.html.

ECB – European Central Bank (2016), “Government Debt Reduction Strategies in the Euroarea”, Economic Bulletin, 3, pp. 46-65.

ECB – European Central Bank (2017a), “Agreement on Emergency Liquidity Assistance”, 17 May, Frankfurt: European Central Bank, available at: https://www.ecb.europa.eu/pub/pdf/other/Agreement _on_emergency_liquidity_assistance_20170517.en.pdf.

ECB – European Central Bank (2017b), “The ECB’s Asset Purchase Programme and TARGET Balances: Monetary Policy Implementation and Beyond”, Economic Bulletin, 3, pp. 21-27.

ESM – European Stability Mechanism (2012), “Treaty Establishing the European Stability Mechanism”, 2 February, Luxembourg, available at: https://www.esm.europa.eu/sites/default/files/20150203_-_esm_treaty_-_en.pdf.

ESRB – European Systemic Risk Board (2018), “Risk Dashboard”, November, Frankfurt, available at: https://www.esrb.europa.eu/pub/pdf/dashboard/esrb.risk_dashboard181213_26.en.pdf.

ESRB High-Level Task Force on Safe Assets (2018), “Sovereign Bond-Backed Securities: A Feasibility Study”, Volumes I and II, Frankfurt.

European Parliament (2018), “Greece’s Financial Assistance Programme – June 2018”, Brussels: European Parliament.

Fiedler S., Kooths S. and Stolzenburg U. (2017), “Target (Im-)balances at Record Level: Should We Worry?”, November, Brussels: European Parliament, Policy Department A, available at: http://www.europarl.europa.eu/cmsdata/131942/MD%20Kiel%20formatted_FINAL%20publication.pdf.

Friedman M. (1968), Dollars and Deficits, Prentice-Hall, New Jersey.

Fuest C. (2018), “[Art 50] Ways to Leave the Euro – Does the Eurozone Need an Exit Clause?”, paper presented to the ESMT Berlin conference Is the Euro Sustainable? – And What If Not?, 14 March, Berlin.

Issing O. (2008), The Birth of Europe, Cambridge: Cambridge University Press.

Kaldor N. (1966), Causes of the Slow Growth of the United Kingdom, Cambridge: Cambridge University Press.

Kohl H. (1991), “Protocol of the Deutsche Bundestag, 6 November”, Bonn.

Kohl H. and Mitterrand F. (1990), “Letter by the German Federal Chancellor Helmut Kohl and French President François Mitterrand to the Irish Presidency of the EC”, Agence Europe, 20 April.

Letta E. (2013), “Intervento”, Senato della Repubblica, 2 October, Rome.

Martinelli T. (2016), “Euro CAC and the Existing Rules on Sovereign Debt restructuring in the Euro Area: An Appraisal Four Years after the Greek Debt Swap”, ADEMU Working Paper, no. 2016/043, available at: http://cadmus.eui.eu/bitstream/handle/1814/44632/ADEMU_2016_043.pdf?sequence=1&isAllowed=y.

Masera R. (1994), “Single Market, Exchange Rates and Monetary Unification”, in Steinherr A. (ed.), 30 Years of European Monetary Integration, London: Longman.

Masera R. (2012), “Risk, Regulation and Supervision of Financial Systems: US and Eurozone Solutions”, ZÖR 67-253-282.

Masera R. (2018a), “BU Rules on Banking Crises: The Need for Revision, Simplification and Completion”, in Troiano V. and Uda G.M. (2018), La gestione delle crisi bancarie, Padova: Cedam.

Masera R. (2018b), “Political Economy of Liquidity: The European Economic and Monetary Union”, in Cardinale I. and Scazzieri R. (eds), The Palgrave Handbook of Political Economy (pp. 489-528), London: Palgrave Macmillan.

Masera R. (2018c), “Eurozone Creation and Possible Exits: Political, Institutional, Monetary and Economic Issues. An Analysis of the Key Stress Points of the Single Currency and Their Interactions”, Law and Economics Yearly Review, 7 (2), pp. 190-241.

Masera R. (2019), “Cyber-Physical Systems and the New Socio-Economic Paradigm: Technology, Knowledge and Human Capital”, in Paganetto L. (ed.), Yearning for Inclusive Growth and Development, Good Jobs and Sustainability, XXX Villa Mondragone International Economic Seminar (2018), forthcoming volume of proceedings, Berlin: Springer.

Meseberg Declaration (2018), 19 June, available at: https://www.bundesregierung.de/Content/EN /Pressemitteilungen/BPA/2018/2018-06-19-meseberg-declaration.html

Minenna M. (2017), “Why ESBies Won’t Solve the Euroarea’s Problems”, Financial Times, 25 April.

Modigliani F., Fitoussi J.-P., Moro B., Snower D., Solow R., Steinherr A. and Sylos Labini P. (1998), “An Economists’ Manifesto on Unemployment in the European Union”, Banca Nazionale del Lavoro Quarterly Review, vol. 51 (206), pp. 327-361.

Mongelli F.P. (2008), “European Economic and Monetary Integration and the Optimum Currency Area Theory”, European Economy, Economic Papers, no. 302, February, Brussels: European Commission.

Moore C. (2011), “Jacques Delors Interview: Euro Would Still Be Strong If It Had Been Built to My Plan”, The Telegraph, 2 December.

Official Journal of the European Union (2016), “Consolidated Versions of the Treaty on European Union and the Treaty on the Functioning of the European Union”, 59, 7 June, available at: https://www.ecb.europa.eu/ecb/legal/pdf/oj_c_2016_202_full_en_txt.pdf.

Praet P. (2018), “Challenges to Monetary Policy Normalization”, speech at the SUERF conference Sustainable Policy Responses: EU and US Perspectives, New York, 20 September, Frankfurt: European Central Bank, available at: https://www.ecb.europa.eu/press/key/date/2018/html/ecb.sp180920.en.html.

Prodi R. (2019), “Mai chiesto ad Aznar di ritardare l’ingresso nell’euro”, Il Sole 24Ore, 17 gennaio.

Regling K. (2018), “A European Monetary Fund: For What Purpose?”, speech at the Euro 50 Group Conference, April 10, Brussels: European Stability Mechanism.

Roncaglia A. (2013), “Luigi Spaventa”, Moneta e Credito, 66 (263), pp. 221-248.

Sapir A. (2018), “High Public Debt in Euro-Area Countries: Comparing Belgium and Italy”, bruegel.org, 6 September, online.

Savona P. (2015), “Origini, significato e funzioni di un piano A e B per l’Italia in Europa”, Scenari economici, 8 ottobre.

Schauble W. (2017), “Non-Paper for Paving the way Towards a Stability Union”, Astrid, 14 (271), online.

Simitis C. (2001), “Greece joins euro”, The Guardian, 1 January.

Sinn H.-W. (2011), “The ECB’s Stealth Bailout”, VoxEu.org, 1 June, online.

Sinn H.-W. (2016), “Target debate“, http://www.hanswernersinn.de/en/controversies/TargetDebate

Spaventa L. (1978), “Intervento”, Atti Parlamentari, Camera dei Deputati, 12 dicembre, Roma.

Spaventa L. (1990), “The Political Economy of European Monetary Integration”, in Banca Nazionale del Lavoro Quarterly Review, 42 (172), pp. 3-20.

Spaventa L. (1996), “Out in the Cold? Outsiders and Insiders in 1999: Feasible and Unfeasible Options”, supplement to Banca Nazionale del Lavoro Quarterly Review, 49 (196), pp. 137-159.

Spaventa L. (2010), “Tornare alla lira? Una follia”, L’Espresso, 30 novembre.

Spaventa L. and Chiorazzo V. (2000), Astuzia o virtù?, Donzelli, Roma.

Sylos Labini P. (1998), “Inflazione, disoccupazione e banca centrale: temi per una riconsiderazione critica”, Moneta e Credito, 51 (203), pp. 363-374.

Thomson Reuters Data Stream/Fathom Consulting (2018), “Euro area market implied probability of default”, http://lipperalpha.financial.thomsonreuters.com/2018/03/news-in-charts-euro-area-default-probabilities-remain-low-on-eve-of-italian-election/

Thomson Reuters Data Stream/Fathom Consulting (2018), “Euro area market implied probability of Euroexit”https://financial.thomsonreuters.com/content/dam/openweb/documents/pdf/financial/fathom-global-economic-and-markets-outlook-q1-2018.pdf

Tonveronachi M. (2016), “Three Proposals for Revitalising the European Union”, PSL Quarterly Review, 69 (279), pp. 301-336.

Turner P. (2017), “The ECB Must Reform Target2 to Make It Sustainable”, Central Banking, 12 June.

Verdoorn P. (1949), “Fattori che regolano lo sviluppo della produttività del lavoro”, L’industria, 1, pp. 45-53.

Visco I. (2018), “ 2018 World Savings Day: Address by the Governor of the Bank of Italy”, ACRI, 31 October, Rome: Banca d’Italia, available at: https://www.bancaditalia.it/pubblicazioni/interventi-governatore/integov2018/en-visco-20181031.pdf?language_id=1.

Westermann F. (2018), “Euro Crisis Monitor”, Universität Osnabrück, November.

White D. and Burns T. (1996), “Still Everything to Play for”, (interview with J.M. Aznar), Financial Times, 30 September.

World Bank (2018), The Worldwide Governance Indicators, Washington (DC).

DOI: https://doi.org/10.13133/2037-3643_72.288_2


  • There are currently no refbacks.

Copyright (c) 2019 Rainer Masera

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.



Sponsored by   

ISSN 2037-3643

Reg. Tribunale di Roma n.377/2009 del 19/11/2009