The Crisis of the Eurozone: Institutions, Policies, and Structural Factors

The euro is based on an irreversible voluntary but incomplete contract among politically sovereign countries. Incompleteness of the institutional setting goes with asymmetric policy setup and effects. This situation is cause in itself of ineffective solutions to distress, but should be considered as reasonable in a group of countries which lack full mutual trust and intend to avoid inter-country distributive processes. Along with the incomplete institutional setup and asymmetric and restrictive policies, the Eurozone also includes serious structural problems. These three factors contribute to the internal divergence between vulnerable and resilient countries. While this divergence may threaten the economic and monetary unification, recently the Eurozone has advanced and started to implement a series of institutional and policy changes that may foster a positive evolution of integration.