Working Paper No. 460 How the Maastricht Regime Fosters Divergence as Well as Fragility by
- Jörg Bibow
"It is not too farfetched to say that Europe chose never really to recover from the two worldwide oil-shock, anti-inflation recessions of the decade 1973 to 1982. Europe seems content to return to sustainable growth rates at lower and lower rates of utilization, without ever recapturing the ground lost in those recessions. With chronic double-digit unemployment rates in several members of the EU, the policy might be described as cutting out of the economy large fractions of the population, buying their acquiescence by welfare-state transfers, and then blaming the "structural" unemployment on the transfers. ... I am not enthralled by the recommendations I heard ... that the U.S. follow the European example and gear monetary policy exclusively to price stability. This orientation of monetary policy has been very costly in Europe, and it is likely to be even more costly if it is enshrined as dogma by the Maastricht Treaty." (James Tobin 1994).