Introduction

This introduction presents an overview of the key concepts discussed in the subsequent chapters of this book. The book addresses one of the most contentious issues affecting the eurozone in the last few years, one which has received an increased attention in the financial media and particularly in Germany. It introduces a standard Mundell-Fleming framework adapted to the features of a closed monetary union, with a two-country setting comprising a “core” and a “periphery” country, to evaluate the response of policy and the economy in case of symmetric and asymmetric demand and supply shocks in the current situation and following the introduction of safe bonds and fiscal capacity. The book discusses whether the monetary union is in fact more than just a monetary union, and whether it will lead inevitably to some form of political union if it is to survive.