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K eynes and the International Clearing Union: A Possible Model for Eurozone Reform?
Author(s) -
Whyman Philip B.
Publication year - 2015
Publication title -
jcms: journal of common market studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.54
H-Index - 90
eISSN - 1468-5965
pISSN - 0021-9886
DOI - 10.1111/jcms.12180
Subject(s) - economics , clearing , balance of payments , payment , order (exchange) , international economics , economic and monetary union , european union , monetary economics , economic policy , finance
Economic and monetary union in E urope, as currently constituted, has a number of structural weaknesses. Large, persistent international payments imbalances necessitate deficit nations to deflate their economies or squeeze social wages in order to restore competitiveness. Surplus nations accrue reserves, with little pressure to maintain related contribution to spending power in the real economy. The asymmetric treatment of credit and debit nations reduces aggregate demand in the eurozone. This article examines a solution, first proposed by J ohn M aynard K eynes, whereby symmetrical treatment of balance of payments transactions may promote economic growth and higher levels of employment. It outlines the key features of the system and highlights the relevance of the solution to the issues faced by the eurozone.