Forced structural convergence in the eurozone : or a differentiated European monetary community

Eight years after the onset of the "Great Recession," the eurozone is deeply split between "Northern" EMU economies that seem to be doing reasonably well and "Southern" countries that continue to struggle with socioeconomic catastrophe. This paper argues that the continuing malaise is a consequence of the structural diversity among Northern and Southern economies and of an asymmetrical euro regime that must try to enforce the structural convergence of their political economies. The present regime is vulnerable, however. It may fail economically should its rules have to be relaxed, and it may fail politically should it no longer be possible to suppress North-South conflicts. In light of these risks, the paper concludes by presenting the outline of a differentiated European Currency Community that would accommodate structurally diverse but highly interdependent economies in a flexible two-level regime.