Ramanan agrees with Cesaratto over Lavoie on the Eurocrisis being a balance of payments crisis.
The ECB alone cannot resolve the crisis. Attempts to boost domestic demand with fiscal policy will bring higher imbalances within the Euro Area. The Euro Area needs a central government with high powers to tax and spend. Regional imbalances will be kept in check via fiscal transfers and regional policies of the government. And the powers of the government won’t be limited with this. There are many other things such as wages which need to be coordinated at the federal level, for example. Euro Area balance-of-payments cannot be neglected.The Case of Concerted Action
Sergio Cesaratto On TARGET2 Balances
Ramanan
