The euro zone’s four most serious problems

We believe the euro zone’s four most serious problems, and which are most difficult to correct, are: The lack of capital mobility between the member countries, which deprives the euro zone of the main expected contribution of monetary unification and one of the efficient ways to carry out risk sharing; The lack of coordination of economic polic ies that generate externalities on other euro-zone countries (choice of companies' social contributions, taxation of earnings, etc.); The lack of a "labour market union" and of a harmonisation of labour market rules, which leads to diverg ing labour costs . This can be corrected by an internal devaluation, but we have seen that such a devaluation is very costly; The lack of advantages generated by the existence of the single market, as Europe has not taken advantage of it to build large groups in services and in industries of the future. If these four problems were solved, a euro-zone budget would be less useful since risk sharing would be ensured by portfolio diversification, the tax policies that generate externalities would be coordinated, and a labour market union would reduce the countries’ heterogeneity.