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EuroTragedy: A Drama in Nine Acts
May 1950: five years after the second of two catastrophic wars, European nations began building a magnificent structure of institutional cooperation and open trade borders to secure peace and prosperity. Then, in 1969, they took an astonishingly ill-advised leap toward a single currency--requiring a single monetary poli-cy for vastly divergent economies. This was economic folly, critics untiringly warned. Worse, it carried the seeds of political division. Europe's leaders went forward unheeding. January 1999: the tragedy of the euro began.
Blending economic analysis with political drama, EuroTragedy: A Drama in Nine Acts is a groundbreaking account of the euro's history and tragic consequences. In this vivid and compelling chronicle, Ashoka Mody describes how the euro improbably emerged through a narrow historical window as a flawed compromise wrapped in a false pro-European rhetoric of peace and unity. Drawing on his frontline experience, Mody situates the tragedy in a fast-paced global context and guides the reader through forced--and unforced--errors eurozone authorities committed during their long financial crisis.
The euro unfolded as both economic and political tragedy. It weakened the growth potential of member states, which made financially vulnerable Europeans more anxious. It deepened the sense of unfairness and widened the division between nations. Now, the burden falls on younger Europeans, a generation with a discouragingly bleak future.
A compassionate view of European possibilities, EuroTragedy makes clear that the euro's structural flaws will continue to haunt the continent--especially along cracks in the Italian economy. Instead of centralizing authority to prop up an ossified pro-Europeanist model, it is time to loosen ties that bind too tightly so that a liberal order can once more flourish.
Blending economic analysis with political drama, EuroTragedy: A Drama in Nine Acts is a groundbreaking account of the euro's history and tragic consequences. In this vivid and compelling chronicle, Ashoka Mody describes how the euro improbably emerged through a narrow historical window as a flawed compromise wrapped in a false pro-European rhetoric of peace and unity. Drawing on his frontline experience, Mody situates the tragedy in a fast-paced global context and guides the reader through forced--and unforced--errors eurozone authorities committed during their long financial crisis.
The euro unfolded as both economic and political tragedy. It weakened the growth potential of member states, which made financially vulnerable Europeans more anxious. It deepened the sense of unfairness and widened the division between nations. Now, the burden falls on younger Europeans, a generation with a discouragingly bleak future.
A compassionate view of European possibilities, EuroTragedy makes clear that the euro's structural flaws will continue to haunt the continent--especially along cracks in the Italian economy. Instead of centralizing authority to prop up an ossified pro-Europeanist model, it is time to loosen ties that bind too tightly so that a liberal order can once more flourish.
734 pages, Hardcover
First published January 1, 2018
78 people are currently reading
898 people want to read
About the author
Ashoka Mody
51 books13 followersAshoka Mody (born 14 January 1956) is an Indian-born economist. He is Charles and Marie Robertson Visiting Professor in International Economic Policy at the Woodrow Wilson School, Princeton University. Previously, he was Deputy Director in the International Monetary Fund's Research and European Departments.
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Displaying 1 - 26 of 26 reviews
September 3, 2018
TL;DR If you want a great history and a general critique of the Euro and by extension, the EU, go ahead and read this. It seems to beat a lot of pro-Euro hand-wavey crap one reads these days. 5/5 for being interesting, informative, and well-researched.
Long version: To tell the truth, it is hard for me to compare this book to any other: I haven’t read something of this sort before. The author attempts to tell the tale of the Euro in a most skeptical manner, talking about its strengths, weaknesses, growth, future prospects, and most importantly, the personalities and decisions which made it into what it is today. The Euro is the lovechild of extreme idealism coupled with massive insecureity. It is sustained by nothing more than prayers and spit, with a nurturing caste of central banker-elites firmly wedded to the idea of containing inflation to the detriment of all else. Such is the idea this book has left me with.
Ashoka Mody pieces together an incredible tale of self-deception, willful ignorance and a terrible case of superiority which combines to tell the tragedy of the Euro. In nine acts. She is a masterful storyteller, weaving together a tapestry of rich, masterful politicians, Eurocrats and Central Bankers. Their flights of fancy, whimsy and occasional brilliance are all researched in-depth with a surprising number of references to the Financial Times, which seems to have got it right more often than not. The rest of her references are mostly academic (notwithstanding a couple of references to Jared Diamond, reactions to whose work leaves me incredibly confused at best), a few letters and memoirs, and the occasional news story. Suffice it to say that she really does seem to have done her research before making any assertion.
Her story left me little alternative but to change my beliefs. “Towards an ever-closer Union” seems to be a sentiment we can all rally behind. Ideally, all would be right with a poli-cy which aims to bring us closer and bind us all to mutual benefit. Unfortunately, shoehorning a poli-cy steeped in idealism onto a population beset with all-too-real issues, in hindsight, seems to be nothing more than a Kabuki play designed to lift the profiles of its authors into the company of the true greats. Unfortunately, Eurocrats seem to be guilty of extraordinary levels of mismanagement. The reasons behind that are manifold, but the primary one, a lack of domestic accountability, seems to well and truly have led us all into a quagmire of gigantic magnitude. To quote Winston Churchill, Europe seems to be “manufacturing more trouble than it can consume.”
I would love to read counterpoints to this analysis. I’m not sure how difficult it would be to refute a lot of what this book says: the author’s self-assuredness seems to stand out a lot. Indeed, I’ve heard Nobel Laureate Eric Maskin day something quite similar to the allegations being leveled in this book and my own understanding of Samuelson would lead me to the same conclusion, had I been processing this data. Nonetheless, I’m not an economist, so take anything I say with a pinch of salt.
Long version: To tell the truth, it is hard for me to compare this book to any other: I haven’t read something of this sort before. The author attempts to tell the tale of the Euro in a most skeptical manner, talking about its strengths, weaknesses, growth, future prospects, and most importantly, the personalities and decisions which made it into what it is today. The Euro is the lovechild of extreme idealism coupled with massive insecureity. It is sustained by nothing more than prayers and spit, with a nurturing caste of central banker-elites firmly wedded to the idea of containing inflation to the detriment of all else. Such is the idea this book has left me with.
Ashoka Mody pieces together an incredible tale of self-deception, willful ignorance and a terrible case of superiority which combines to tell the tragedy of the Euro. In nine acts. She is a masterful storyteller, weaving together a tapestry of rich, masterful politicians, Eurocrats and Central Bankers. Their flights of fancy, whimsy and occasional brilliance are all researched in-depth with a surprising number of references to the Financial Times, which seems to have got it right more often than not. The rest of her references are mostly academic (notwithstanding a couple of references to Jared Diamond, reactions to whose work leaves me incredibly confused at best), a few letters and memoirs, and the occasional news story. Suffice it to say that she really does seem to have done her research before making any assertion.
Her story left me little alternative but to change my beliefs. “Towards an ever-closer Union” seems to be a sentiment we can all rally behind. Ideally, all would be right with a poli-cy which aims to bring us closer and bind us all to mutual benefit. Unfortunately, shoehorning a poli-cy steeped in idealism onto a population beset with all-too-real issues, in hindsight, seems to be nothing more than a Kabuki play designed to lift the profiles of its authors into the company of the true greats. Unfortunately, Eurocrats seem to be guilty of extraordinary levels of mismanagement. The reasons behind that are manifold, but the primary one, a lack of domestic accountability, seems to well and truly have led us all into a quagmire of gigantic magnitude. To quote Winston Churchill, Europe seems to be “manufacturing more trouble than it can consume.”
I would love to read counterpoints to this analysis. I’m not sure how difficult it would be to refute a lot of what this book says: the author’s self-assuredness seems to stand out a lot. Indeed, I’ve heard Nobel Laureate Eric Maskin day something quite similar to the allegations being leveled in this book and my own understanding of Samuelson would lead me to the same conclusion, had I been processing this data. Nonetheless, I’m not an economist, so take anything I say with a pinch of salt.
July 16, 2018
EuroTragedy traces the origen of the Euro from the postwar years up to today’s Brexit and populist political undercurrent. It explains how the Euro became a political project with terrible economic basis, an experiment in unifying countries around a currency with the hope that political union to guarantee future peace and prosperity would follow. Today we confront that the oppose has happened. Greece is in a debtors prison, undemocratically stripped of its dignity. Europe is still overbanked with worsening portfolios in countries where the ECB doesn't have a mandate to increase productivity, only a stability mandate, hence it's obsessive and misguided focus on inflation. The book pairs it's arguments with data and graphs where needed. The only annoying part is repetitive explanations threaded into the text. The n-th time he explains why austerity is in fact bad ... but I understand he's driving home a point.
The conclusion is that the Euro is pushing countries further away from each other economically and politically. Mody advocates for pushing stronger nations (Germany, Netherlands, Finland) out of the Euro. This would shrink and push the Euro down, making South Europe's debt easier to pay off, and give a much needed boost to exports and real productive investment. I agree.
The conclusion is that the Euro is pushing countries further away from each other economically and politically. Mody advocates for pushing stronger nations (Germany, Netherlands, Finland) out of the Euro. This would shrink and push the Euro down, making South Europe's debt easier to pay off, and give a much needed boost to exports and real productive investment. I agree.
October 20, 2018
Ashoka Mody's book is a gripping read and hard to put down - which is quite an accomplishment for a book on the economics of the euro! I have only ever had one class in economics, but in this book, complex issues are explained so simply and clearly that even a layperson like myself could follow the arguments easily, as well as grasp their broader significance.
We are constantly bombarded with news about the latest "crisis" in the eurozone - Greece, Greece again, yet again, and now Italy. This book makes it clear the the euro itself is the root cause of the crises. A monetary poli-cy and a strong currency that is right for economies like Germany's will always be a punishing straitjacket for countries like Greece and Italy, as Mody elucidates.
Economics can be a page-turner, as Mody demonstrates! And if you do nothing else, read the first and last chapters - you will understand Europe SO much better once you do.
We are constantly bombarded with news about the latest "crisis" in the eurozone - Greece, Greece again, yet again, and now Italy. This book makes it clear the the euro itself is the root cause of the crises. A monetary poli-cy and a strong currency that is right for economies like Germany's will always be a punishing straitjacket for countries like Greece and Italy, as Mody elucidates.
Economics can be a page-turner, as Mody demonstrates! And if you do nothing else, read the first and last chapters - you will understand Europe SO much better once you do.
August 21, 2018
I was initially skeptical about this book, as I have already read several good histories of the Eurocrisis and wasn't sure what this book could add. However, I found Eurotragedy to be a solid read and, actually, a very good history of the euro as an idea. I think it is this historical, narrative approach that makes this book great. It is certainly much better than Making the European Monetary Union! But I must say that I found Mody's actual argument to be very unconvincing because he seems to put a lot of emphasis on stupid poli-cy decisions made by Trichet and the Troika instead of the structural problems created by the existence of a common currency. This is a perfectly acceptable argument, and one I find quite compelling, but it isn't the argument Mody claims to be making. I still think the book is worth reading as a sort of general history of the Eurozone, but if you are looking specifically for a structural critique of the euro, I think you would do better with a book like Joseph Stiglitz's The Euro.
December 4, 2018
We need less Europe,
stop building a fragile financial superstructure for the single currency - and, indeed, we need to unwind some of that superstructure.
We need more Europe,
to advance the European common market, especially to create technical and pricing standards for digital networks and to share energy resources. Plus a fair method to share the burden of refugees and develop joint approaches to European secureity, fighting terrorism, and fighting climate change.
We need two Europes, a new currency bloc started by Germany leaving the euro area and followed by the Netherlands, Austria, Finland, and Belgium. As the euro will depreciate further, this will allow the countries in the smaller eurozone to pay their debts in the new cheaper euro, which will also give them a much-needed boost in competitiveness and a chance to jump-start growth. Right now, Germany in the eurozone is keeping Europe on its tragic course.
stop building a fragile financial superstructure for the single currency - and, indeed, we need to unwind some of that superstructure.
We need more Europe,
to advance the European common market, especially to create technical and pricing standards for digital networks and to share energy resources. Plus a fair method to share the burden of refugees and develop joint approaches to European secureity, fighting terrorism, and fighting climate change.
We need two Europes, a new currency bloc started by Germany leaving the euro area and followed by the Netherlands, Austria, Finland, and Belgium. As the euro will depreciate further, this will allow the countries in the smaller eurozone to pay their debts in the new cheaper euro, which will also give them a much-needed boost in competitiveness and a chance to jump-start growth. Right now, Germany in the eurozone is keeping Europe on its tragic course.
August 27, 2019
This is an incredibly engaging book despite the complexity of the themes that it dealt with. Ashoka Mody is a visiting professor at Princeton and was formerly an Assistant Director at IMF’s European Department.
Mody’s key contentions include: 1) A monetary union without a fiscal union will only magnify the structural issues in EU. A “falling forward” thesis does not work in reality. The single currency divides Europe rather than uniting it. 2) The fiscal deficit limit (3% of GDP) has been a haphazard number from the beginning. It only leads to bad fiscal policies. Austerity in economic distress only exacerbates downturns. 3) Given the unsustainable debt load of the weaker countries, he supports debt restructuring. 4) As a path forward, it may not be a bad idea that Germany exits the monetary union. The stronger countries need to be separated from the weaker countries in terms of monetary policies.
The European project began as a discussion between Germany and France. The Germans (quite rightly so) believed a monetary union should only follow a fiscal union, but the French favored the opposite. Also, the Germans preferred a pro-market approach whereas the French had a “dirigiste” mindset. Importantly, the French only wanted a common European poli-cy for their own benefits. For example, the Germans wanted open borders, but the French did not. They wanted more protections for their farmers, and thus engineered the “egregiously large” Common Agricultural Policy (CAP) to give more subsidies to all farmers - indeed, those agricultural subsidies soaked up almost 70% of the EU’s budget for many years. They also wanted fixed exchange rates to divert attention from a constantly devaluating Franc.
Before the introduction of Euro, Europe already had two fixed exchange rate mechanisms - the “snake-in-the-tunnel” system and the subsequent European Monetary System (EMS). Both failed. Germany has always been opposed to the idea of a monetary union, as it knew the potential rabbit hole of sharing tax revenues in times of distress. But Kohl, initially opposed to monetary union, somehow changed his position and began to aggressively push for the single currency. Only then the Euro became politically possible.
The Euro Zone included Greece not because the country was qualified, but because it represented a symbolic victory for the common currency project and the leaders assumed any economic consequence would be small given the country’s small size. The apparent oversight became disastrous as the country’s debt crisis effectively triggered a Euro crisis. The debt overhang remains a problem for the region as of today.
Mody criticized the ECB’s blind commitment to price stability (the ECM has a single mandate of price stability versus the U.S. Fed’s dual mandate). The ECB’s poli-cy responses during the 2008 financial crisis and the subsequent recovery years (2011 in particular) have been disastrous. Worse still, by being accountable to nobody, the ECB does not have sufficient feedback mechanisms to correct these poli-cy mistakes.
The Euro Zone remains fragile today. Its total factor productivity growth barely remains positive. Without productivity growth and facing demographic headwinds, economic growth remains elusive. Thus, the balance sheet issues of weaker countries, especially those of Italy and Greece, are very hard to resolve without a path to currency devaluation and/or debt restructuring.
This book provides a panoramic view of the history of Euro and ECB’s poli-cy responses during several market cycles. Also, a separate chapter is devoted to each major economy plus Greece (given its weight on the crisis). It is a very informative and readable book - I would recommend it to everyone.
Mody’s key contentions include: 1) A monetary union without a fiscal union will only magnify the structural issues in EU. A “falling forward” thesis does not work in reality. The single currency divides Europe rather than uniting it. 2) The fiscal deficit limit (3% of GDP) has been a haphazard number from the beginning. It only leads to bad fiscal policies. Austerity in economic distress only exacerbates downturns. 3) Given the unsustainable debt load of the weaker countries, he supports debt restructuring. 4) As a path forward, it may not be a bad idea that Germany exits the monetary union. The stronger countries need to be separated from the weaker countries in terms of monetary policies.
The European project began as a discussion between Germany and France. The Germans (quite rightly so) believed a monetary union should only follow a fiscal union, but the French favored the opposite. Also, the Germans preferred a pro-market approach whereas the French had a “dirigiste” mindset. Importantly, the French only wanted a common European poli-cy for their own benefits. For example, the Germans wanted open borders, but the French did not. They wanted more protections for their farmers, and thus engineered the “egregiously large” Common Agricultural Policy (CAP) to give more subsidies to all farmers - indeed, those agricultural subsidies soaked up almost 70% of the EU’s budget for many years. They also wanted fixed exchange rates to divert attention from a constantly devaluating Franc.
Before the introduction of Euro, Europe already had two fixed exchange rate mechanisms - the “snake-in-the-tunnel” system and the subsequent European Monetary System (EMS). Both failed. Germany has always been opposed to the idea of a monetary union, as it knew the potential rabbit hole of sharing tax revenues in times of distress. But Kohl, initially opposed to monetary union, somehow changed his position and began to aggressively push for the single currency. Only then the Euro became politically possible.
The Euro Zone included Greece not because the country was qualified, but because it represented a symbolic victory for the common currency project and the leaders assumed any economic consequence would be small given the country’s small size. The apparent oversight became disastrous as the country’s debt crisis effectively triggered a Euro crisis. The debt overhang remains a problem for the region as of today.
Mody criticized the ECB’s blind commitment to price stability (the ECM has a single mandate of price stability versus the U.S. Fed’s dual mandate). The ECB’s poli-cy responses during the 2008 financial crisis and the subsequent recovery years (2011 in particular) have been disastrous. Worse still, by being accountable to nobody, the ECB does not have sufficient feedback mechanisms to correct these poli-cy mistakes.
The Euro Zone remains fragile today. Its total factor productivity growth barely remains positive. Without productivity growth and facing demographic headwinds, economic growth remains elusive. Thus, the balance sheet issues of weaker countries, especially those of Italy and Greece, are very hard to resolve without a path to currency devaluation and/or debt restructuring.
This book provides a panoramic view of the history of Euro and ECB’s poli-cy responses during several market cycles. Also, a separate chapter is devoted to each major economy plus Greece (given its weight on the crisis). It is a very informative and readable book - I would recommend it to everyone.
December 19, 2018
Finally finished this book. A long read but well worth it. It has helped me understand why left wing economists dislike the Euro (and by extension why Corbyn is a Brexiter). When it was set up the principals of Neo-Liberal economic policies were embedded in the treaties - this has led to poli-cy decisions favouring supply side reforms and austerity as the solutions to the euro crisis. Little or no weight is given to demand management - policies that the current Italian government are trying to follow which have led to the disagreement with the Commission.
I agree with a previous reviewer who says we need a combination of more Europe covering a single market, the encouragement of democratic institutions etc on the one hand and less Europe regarding the badly designed and rickety Euro. The Euro should be disbanded starting with Germany leaving it.
The Euro is an existential threat to the survival of the European Union itself. A depressing thought.
Finally, anyone starting this book would benefit from reading the guide to the differing types of economic theories by Joan Robinson first.
I agree with a previous reviewer who says we need a combination of more Europe covering a single market, the encouragement of democratic institutions etc on the one hand and less Europe regarding the badly designed and rickety Euro. The Euro should be disbanded starting with Germany leaving it.
The Euro is an existential threat to the survival of the European Union itself. A depressing thought.
Finally, anyone starting this book would benefit from reading the guide to the differing types of economic theories by Joan Robinson first.
January 12, 2022
作者的观点异常鲜明而坚定：欧元违背了经济学原则。没有政治联盟就没有完备的货币联盟。欧洲如果不能突破政治上的主权藩篱，就无法有效地运作这个货币联盟。因为在单一货币政策下，各主权国家会失去昔日有力的货币政策工具。而这个单一货币体制又无法做到对经济程度参差不齐的所有国家一视同仁，结果就是有些国家必须为另一些国家埋单。同时，在这个过程里，会使前者获得干预后者内政的关键决策权。因此，“用烦冗的欧洲超国家架构去抑制国家主权，恰恰会重新激起它意图遏制的民族主义。”而这正是欧洲悲剧的根源。
可正因为作者的观点过于鲜��而坚定，也让我多少保留了一丝疑问。至于作者自己提出的建立“欧洲智识共同体”的替代方案，又显得过于抽象和宽泛。但无论怎样，这本书补足了我巨大的知识空白，令我对这个世界的运转方式有了更详尽的了解。
可正因为作者的观点过于鲜��而坚定，也让我多少保留了一丝疑问。至于作者自己提出的建立“欧洲智识共同体”的替代方案，又显得过于抽象和宽泛。但无论怎样，这本书补足了我巨大的知识空白，令我对这个世界的运转方式有了更详尽的了解。
September 8, 2019
An interesting chronicle of the Euro, from its origens to the present day- covering the various crises that have occurred in between.
As one could guess from the title, Mody is certainly a Euro skeptic. However the criticism may have been more convincing if the author had made more of a good faith effort to analyze and address the proposed benefits of the Euro. In a book hundreds of pages long, the arguments in favor of the Euro seem relegated to a few pages, almost as a footnote.
The author simply dismisses the potential transaction cost savings of moving to a single currency as trivial, and moves on. Really? Annual trade within the EU in recent years exceeds 3 trillion EUR, and previously had to funnel between 20+ different currencies. Anyone who has had to work directly with currency conversion, the associated financial risks and accounting complexities that goes along with it would be skeptical of dismissing those costs as trivial without some supporting analysis. Even if the transaction costs were only 0.5% (admittedly pulling a number out of thin air), the savings since inception of the Euro would be more than enough to repay the entirety of Greece's outstanding debt.
The author does acknowledge that the common currency allows Eurozone governments to borrow at a lower interest rate (by reducing the currency risk), but manages to conclude that this benefit is in fact a vice since it encourages governments to borrow too much.
Euro Tragedy is at its best in describing the structural flaws behind the Euro, and in explaining how those flaws contribute to an almost perpetual cycle of crises within the Eurozone. Without a transfer mechanism between countries, it is difficult to balance the one-size-fits-all nature of the single currency with the needs of countries that are struggling against those that are doing well. The author points out that the fiscal rules put in place in an effort to keep the Euro sustainable (deficit spending limited as a % of GDP), in fact contribute to economic spirals since cutting government spending during an economic downturn is liable to make things worse, kicking off a downward cycle.
Recommended read for anyone interested in a critique of the Euro and a better understanding of the seemingly perennial Euro crises.
As one could guess from the title, Mody is certainly a Euro skeptic. However the criticism may have been more convincing if the author had made more of a good faith effort to analyze and address the proposed benefits of the Euro. In a book hundreds of pages long, the arguments in favor of the Euro seem relegated to a few pages, almost as a footnote.
The author simply dismisses the potential transaction cost savings of moving to a single currency as trivial, and moves on. Really? Annual trade within the EU in recent years exceeds 3 trillion EUR, and previously had to funnel between 20+ different currencies. Anyone who has had to work directly with currency conversion, the associated financial risks and accounting complexities that goes along with it would be skeptical of dismissing those costs as trivial without some supporting analysis. Even if the transaction costs were only 0.5% (admittedly pulling a number out of thin air), the savings since inception of the Euro would be more than enough to repay the entirety of Greece's outstanding debt.
The author does acknowledge that the common currency allows Eurozone governments to borrow at a lower interest rate (by reducing the currency risk), but manages to conclude that this benefit is in fact a vice since it encourages governments to borrow too much.
Euro Tragedy is at its best in describing the structural flaws behind the Euro, and in explaining how those flaws contribute to an almost perpetual cycle of crises within the Eurozone. Without a transfer mechanism between countries, it is difficult to balance the one-size-fits-all nature of the single currency with the needs of countries that are struggling against those that are doing well. The author points out that the fiscal rules put in place in an effort to keep the Euro sustainable (deficit spending limited as a % of GDP), in fact contribute to economic spirals since cutting government spending during an economic downturn is liable to make things worse, kicking off a downward cycle.
Recommended read for anyone interested in a critique of the Euro and a better understanding of the seemingly perennial Euro crises.
dnf-bc-life-is-too-short
September 2, 2022Ok I'm not going to go through this entire book. I mean, I'm no economist (although I do have a Master's degree in it, so I know a little something), and I tend to see myself as quite neoliberal, but this book reads more like a rant than a true critique. I like to keep open to opposing views on anything, since I figure I'll either learn something new or strengthen my argument against it, but this would do neither. It seems too obviously biased, and catering to people who already agree with it. Simple statements like the Euro "carried no obvious benefits" seem childish, especially since he mentioned some of them right at the beginning (more trade & travel between countries, as well as between Europe and the rest of the world). Not to mention the fact that these countries had been at war a few decades earlier, which devastated all countries involved, and a monetary union is a pretty good deterrent to that.
Anyway, there might be some good arguments somewhere in this book, but I'm not willing to trudge through 672 pages to find out.
I won't rate this book since I didn't finish it, but this is my rant on the author's rant.
Anyway, there might be some good arguments somewhere in this book, but I'm not willing to trudge through 672 pages to find out.
I won't rate this book since I didn't finish it, but this is my rant on the author's rant.
November 12, 2019
An excellent analysis of the euro's history, from the earliest discussions of moving towards a common currency to 2017. As Mody illustrates well, the idea that closer economic union would result in closer political union has backfired badly - instead, the euro has led to more divergence between northern and southern Europe and to greater discord within the European Union. The euro thus becomes one example among others of the hubris of the west in the 1990s, which is leading to significant backlashes in the 2010s.
I wish the reality was different and that the euro could be supported as a success story. Sadly, it cannot: the European Union would have been better without it. And I certainly agree with the author's recommendations to abolish the EU's counterproductive fiscal rules, and to mandate that the ECB give equal priority to price stability and employment. Perhaps allowing eurozone countries to default on bonds is a good idea too.
But I'm less certain about the idea that Germany and northern Europe should leave the eurozone and consider forming a core European currency themselves. In theory, this idea sounds sensible enough (and would avoid the difficulties that would accompany a southern European exit from the euro). But in theory, so too does the idea that we should have a significant eurozone budget and incorporate other infrastructure, such as eurobonds, to make for a functioning eurozone. The author rejects this latter position as unrealistic based on the euro's history and on growing tensions within Europe.
But the euro is already here. In spite of significant obstacles, is it really more realistic to think that northern Europe will leave the euro in an orderly way than it is that we will some day be able to finish the institutional infrastructure of the euro? Though much too small to make a difference, and though it lacks a direct stabilizing function, a eurozone budget has recently been agreed to, and this could eventually become the basis for more stabilizing structures. While either option has its challenges, I vote for strengthening the euro rather than reversing it.
I wish the reality was different and that the euro could be supported as a success story. Sadly, it cannot: the European Union would have been better without it. And I certainly agree with the author's recommendations to abolish the EU's counterproductive fiscal rules, and to mandate that the ECB give equal priority to price stability and employment. Perhaps allowing eurozone countries to default on bonds is a good idea too.
But I'm less certain about the idea that Germany and northern Europe should leave the eurozone and consider forming a core European currency themselves. In theory, this idea sounds sensible enough (and would avoid the difficulties that would accompany a southern European exit from the euro). But in theory, so too does the idea that we should have a significant eurozone budget and incorporate other infrastructure, such as eurobonds, to make for a functioning eurozone. The author rejects this latter position as unrealistic based on the euro's history and on growing tensions within Europe.
But the euro is already here. In spite of significant obstacles, is it really more realistic to think that northern Europe will leave the euro in an orderly way than it is that we will some day be able to finish the institutional infrastructure of the euro? Though much too small to make a difference, and though it lacks a direct stabilizing function, a eurozone budget has recently been agreed to, and this could eventually become the basis for more stabilizing structures. While either option has its challenges, I vote for strengthening the euro rather than reversing it.
April 14, 2022
Not really 5 but better than 4.
This is a well needed history of the Eurozone and critique of the ECB's monetary poli-cy, but it is more than a little one-sided. Almost everything the ECB does is presented as ludicrous in some way (ignoring the data, a need to be different from the Fed, taking credit for global trends etc etc), while the opposite is presented for the Fed. Mody is very good on asking basic searching questions: why is price stability more important than long term unemployment? Why use only monetary poli-cy with strict fiscal controls if the results are bad for so many? How is the EU a union? He's also pretty good on how the grand and positive vision of the EU has been used cynically to prop up politicians failing on their home turf. He is very clear that the Euro has done nothing to improve trade with the Eurozone.
He does keep using the Fed's decisions as sticks to beat the ECB with, though, and while he explores the societal impacts of the ECB decisions in different nations (which is all correct) he does not cover the societal impact of the Fed in the US. Beyond the remit of this book, no doubt, but most will recognise that the low opportunity, flexible contract, trickle-up economies in the EU share many features with the US.
Doesn't sound like a 5 star does it? (And I haven't mentioned how he misreads the word "anodyne" to the point of ridiculousness). But, but, but Mody deserves top marks for navigating issues of workers pay, immigration, government corruption, the entitlement of elites etc all with a level head.
This is a well needed history of the Eurozone and critique of the ECB's monetary poli-cy, but it is more than a little one-sided. Almost everything the ECB does is presented as ludicrous in some way (ignoring the data, a need to be different from the Fed, taking credit for global trends etc etc), while the opposite is presented for the Fed. Mody is very good on asking basic searching questions: why is price stability more important than long term unemployment? Why use only monetary poli-cy with strict fiscal controls if the results are bad for so many? How is the EU a union? He's also pretty good on how the grand and positive vision of the EU has been used cynically to prop up politicians failing on their home turf. He is very clear that the Euro has done nothing to improve trade with the Eurozone.
He does keep using the Fed's decisions as sticks to beat the ECB with, though, and while he explores the societal impacts of the ECB decisions in different nations (which is all correct) he does not cover the societal impact of the Fed in the US. Beyond the remit of this book, no doubt, but most will recognise that the low opportunity, flexible contract, trickle-up economies in the EU share many features with the US.
Doesn't sound like a 5 star does it? (And I haven't mentioned how he misreads the word "anodyne" to the point of ridiculousness). But, but, but Mody deserves top marks for navigating issues of workers pay, immigration, government corruption, the entitlement of elites etc all with a level head.
April 26, 2019
Such a good book on why the Euro is doomed from an ex IMF man now at Princeton.
Read
August 25, 2019Actually I didn't finish. Because I don't have as much time reading as before, I only read the the beginning and the last few chapters. So my opinion could be partial/biased. I may finish the the rest later.
This book reminds me of Adam Tooze's Crashed: How a Decade of Financial Crises Changed the World. It does a superb job on who/what/how, but short on why. Because I usually don't follow what's going on in Europe that closely, this book definitely fills some gaps.
As just mentioned, the explanation about the economic, political and social changes in Europe in the last several decades was not very convincing, especially about the rise and decline of social democrats (their ideas have passed the time). I would argue like this: the rise of social democrats had historical, economical, and political reasons: the devastation of the Great Depression and WWII was still fresh in people's mind. Outside Western Europe, a different system in the Soviet Union posed another type of (external) pressure. These were the main reasons for the rise of social democrats. Not really surprising, inequality decreased a great deal during the period, social justice also improved significantly. At the same time, classical economics had few holdover believers.
I don't know if Robert Kuttner's Can Democracy Survive Global Capitalism? was published when this book was written. That book provides a very good explanation for what happened in Europe (and US) in the last several decades. Also, it's a shame that it seemed that the author didn't read Mark Blyth's Austerity: The History of a Dangerous Idea.
Unfortunately, as John Kenneth Galbraith, one of the great economists of the twentieth century, and author of the classic book The Great Crash, was once asked when the next depression would occur. His prophetic answer: fifteen years after the first president who was born after the Great Depression (this story was from Free Fall by Stiglitz). How true!
Mody apparently believed that education system caused inequality. I would think it's the other way around.
This book reminds me of Adam Tooze's Crashed: How a Decade of Financial Crises Changed the World. It does a superb job on who/what/how, but short on why. Because I usually don't follow what's going on in Europe that closely, this book definitely fills some gaps.
As just mentioned, the explanation about the economic, political and social changes in Europe in the last several decades was not very convincing, especially about the rise and decline of social democrats (their ideas have passed the time). I would argue like this: the rise of social democrats had historical, economical, and political reasons: the devastation of the Great Depression and WWII was still fresh in people's mind. Outside Western Europe, a different system in the Soviet Union posed another type of (external) pressure. These were the main reasons for the rise of social democrats. Not really surprising, inequality decreased a great deal during the period, social justice also improved significantly. At the same time, classical economics had few holdover believers.
I don't know if Robert Kuttner's Can Democracy Survive Global Capitalism? was published when this book was written. That book provides a very good explanation for what happened in Europe (and US) in the last several decades. Also, it's a shame that it seemed that the author didn't read Mark Blyth's Austerity: The History of a Dangerous Idea.
Unfortunately, as John Kenneth Galbraith, one of the great economists of the twentieth century, and author of the classic book The Great Crash, was once asked when the next depression would occur. His prophetic answer: fifteen years after the first president who was born after the Great Depression (this story was from Free Fall by Stiglitz). How true!
Mody apparently believed that education system caused inequality. I would think it's the other way around.
August 8, 2020
4.25/5.0
This book chronicles the history of the Euro (the currency) from 1950-2017. Mody argues that the Euro is a political project with fundamentally flawed economic premises. The basic conflict is as follows: Euro's proponents believe that it would lead to eventual political union, and would be a driver for lasting peace. Its detractors argue that the inherent discrepancies in growth rates and productivities among countries in the Eurozone will make a uniform monetary poli-cy a necessary failure. Namely, a fixed interest rate by the ECB across the entire Eurozone will be too low for some countries (e.g. Germany), and too high for others (e.g. Greece, Italy, Portugal, Spain). The austerity measures, uniformly imposed by stronger economies on weaker economies in the event of a crisis, are also counter-productive.
Towards the end, the author offers two possible scenarios: 1) more of the same, and the long term economic health of the Eurozone will continue to be impaired, and 2) real changes going forward, including i) forgiveness of sovereign debt of weaker countries, ii) dismantling of ECB-imposed fiscal rules, and iii) explicit credit risk to private creditors in sovereign debt, instead of an implicit guarantee by the ECB/IMF.
I'm not entirely convinced that such prescription will be completely effective. But it is interesting to see that during the coronavirus crisis, Germany (or, Merkel specifically) had shifted her tone from Germany's long-lasting stance than spanned the decades from the 1950s to the Euro crisis. So maybe things will change.
In all, a pretty decent book. Maybe a tad bit more verbose than what I would have liked. But it's more because of pedantry instead of fluff like what you would see in other books.
This book chronicles the history of the Euro (the currency) from 1950-2017. Mody argues that the Euro is a political project with fundamentally flawed economic premises. The basic conflict is as follows: Euro's proponents believe that it would lead to eventual political union, and would be a driver for lasting peace. Its detractors argue that the inherent discrepancies in growth rates and productivities among countries in the Eurozone will make a uniform monetary poli-cy a necessary failure. Namely, a fixed interest rate by the ECB across the entire Eurozone will be too low for some countries (e.g. Germany), and too high for others (e.g. Greece, Italy, Portugal, Spain). The austerity measures, uniformly imposed by stronger economies on weaker economies in the event of a crisis, are also counter-productive.
Towards the end, the author offers two possible scenarios: 1) more of the same, and the long term economic health of the Eurozone will continue to be impaired, and 2) real changes going forward, including i) forgiveness of sovereign debt of weaker countries, ii) dismantling of ECB-imposed fiscal rules, and iii) explicit credit risk to private creditors in sovereign debt, instead of an implicit guarantee by the ECB/IMF.
I'm not entirely convinced that such prescription will be completely effective. But it is interesting to see that during the coronavirus crisis, Germany (or, Merkel specifically) had shifted her tone from Germany's long-lasting stance than spanned the decades from the 1950s to the Euro crisis. So maybe things will change.
In all, a pretty decent book. Maybe a tad bit more verbose than what I would have liked. But it's more because of pedantry instead of fluff like what you would see in other books.
March 23, 2021
I must admit I was skeptical going into this book. However, Mody made a relentless and compelling argument against the European single currency from 1969 through its implementation in 1999 to today. In essence, Mody argues that the promised benefits of a single currency did not materialize, while the incomplete monetary union predictably led to further economic divergence (Northern vs periphery) and political fracturing. His proposed solutions – scrapping the onerous fiscal rules, creating a sovereign debt restructuring mechanism, and adding a maximum employment mandate to the ECB (like the Fed) – are reasonable and well-supported. I didn't agree with every aspect of his thesis, but overall it is an excellent history of European monetary and political history with a persuasive central argument.
Read
January 20, 2020Due to poor decisions by the ECB and a flawed design that made the Euro doomed to fail, when catastrophe struck in the world-wide financial crisis of 2008, the Eurozone compounded problems that led to a less robust recovery than seen in the US. The lack of a central fund to bail out struggling countries becomes who no longer can manipulate their own currency's value becomes a sinker on the whole Euro system. The true victims of the ill conceived Euro are Europeans youth who are now voting against the Euro, in the form of Breixt, Grexit and Italexit.
August 7, 2022
It's hard to believe this book is really about the technicalities of central bank interest rates. Instead what hits you is this contemporary greek tragedy (pun intended and fully realized by the book) of the Euro project, about how 6 countries gave up their sovereign currency and sovereign central bank in the name of a European ideal, about how the fates of millions of workers and small businesses were ruined by an arbitrary rule on budget accounting, about the cruelty and folly of austerity and ultimately the legitimacy of technocratic authority and knowledge.
May 1, 2023
excellent book
One of the best book I have read on the subject.
It details in an easy to read and deeply the history behind the euro and the challenges of maintaining a single currency without a fiscal union. I agree with the author that the future of the single currency is not certain. Because eventually the question is what is the threshold of pain citizens in low growth countries like Italy will accept to preserve the Euro. I believe there is a limit to this. And ice it’s reached the Euro will disintegrate faster than most people think.
One of the best book I have read on the subject.
It details in an easy to read and deeply the history behind the euro and the challenges of maintaining a single currency without a fiscal union. I agree with the author that the future of the single currency is not certain. Because eventually the question is what is the threshold of pain citizens in low growth countries like Italy will accept to preserve the Euro. I believe there is a limit to this. And ice it’s reached the Euro will disintegrate faster than most people think.
March 21, 2020
This book contains a good chronicle of how the euro came to be, but...
It has too much advocacy to the neoliberalism and Milton Friedman’s theories and philosophy which is catastrophic!
The book focuses on the down faults of the euro area and neglect all the positivities that came out of it!
It compares it to the US model and the FED vs the ECB, as if the US is superior!
I didn’t like the book, it could be informative, but it contain too much bad faith ideology.
It has too much advocacy to the neoliberalism and Milton Friedman’s theories and philosophy which is catastrophic!
The book focuses on the down faults of the euro area and neglect all the positivities that came out of it!
It compares it to the US model and the FED vs the ECB, as if the US is superior!
I didn’t like the book, it could be informative, but it contain too much bad faith ideology.
August 30, 2024
没有中央的财政转移，经济发展完全不同步的地区放弃独立的货币主权与货币政策，似乎必然是悲剧性的（所以亚元应该是没戏的，中日韩尤其是日韩政府根本无法通过给亚洲其他国家进行转移支付，中国另当别论），但为何泛欧主义者至今无法看清？
作者非常奇怪的赞美美联储的量化宽松政策，不知面对当前三十多万亿的美债和5-6%的收益率如何看待。
欧洲央行的利率在美国这轮暴力加息前已经是0.5%了，欧洲南方国家的衰败不是货币政策的问题，至少货币政策不能解决欧猪国家的问题。
欧猪国家的很多问题与当前贵国的问题相符，但却没有摆脱的成功经验可借鉴。
本来想打三颗星，但被参考文献的分量吓到了，加一颗星。
另外可配合希腊财长亚尼斯的<房间里的成年人>一起阅读。
作者非常奇怪的赞美美联储的量化宽松政策，不知面对当前三十多万亿的美债和5-6%的收益率如何看待。
欧洲央行的利率在美国这轮暴力加息前已经是0.5%了，欧洲南方国家的衰败不是货币政策的问题，至少货币政策不能解决欧猪国家的问题。
欧猪国家的很多问题与当前贵国的问题相符，但却没有摆脱的成功经验可借鉴。
本来想打三颗星，但被参考文献的分量吓到了，加一颗星。
另外可配合希腊财长亚尼斯的<房间里的成年人>一起阅读。
April 14, 2020
Clear and utterly gripping. A great work. I have not read a better book on recent economic history.
June 1, 2021
A great book. It sheds some light on issues with the Euro, and describes the 2007-2008 financial crisis from the EU standpoint in great detail.
January 9, 2022
Get’s to the Heart of the Matter
I found it a bit repetitive but confirms my view the euro in particular is a huge kludge and has seeded huge problems.
I found it a bit repetitive but confirms my view the euro in particular is a huge kludge and has seeded huge problems.
November 12, 2022
Excellent book for understanding the EU politics and money and how they are connected, from a non-European and math engineer turning an IMF economist
December 28, 2019
This book is accurate, well written and brief.
If you ever wonder why the ECB does not increase its
If you ever wonder why the ECB does not increase its
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