Will Euro be sustainable ?

On the long run, Euro sustainability relies on the results, which will be obtained for growth and employment in the area’s national economies. Euro can suffer from contradictions between its economic basis (dogmatic independence of the Central Bank) and its political aims (United States of Europe, built on a federal model). Euro complete achievement was allowed by positive results, stemming from the initial fall of its exchange rate, which led to a strong unemployment decline from 1998 to 2000. Nevertheless, this fall wasn’t wished, being only the after-effects of the Federal reserve monetary policy. Since 1999 January 1st, policy of the European Central Bank has applied Taylor’s rule, combining two targets of growth and inflation. Use of a debatable measure of potential growth has led to a too restrictive policy, which has put Euroland on the towline of American business cycle in 2001. So, eventual Euro success can only be obtained by a more coherent policy, implying that the European Council has a clear upper hand over the Commission and the ECB. – Summary AFRI-2002