Fairness and Risk-Sharing in Transnational Monetary Governance

Creating the Eurozone has been one of the most significant steps of European integration: By voluntarily abandoning exchange rates and transferring control over monetary matters to a supranational central bank, states have surrendered autonomy over some of the key elements of macroeconomic policy. Monetary union has had a crucial impact on how states can provide government functions, including some central to the realisation of economic justice. This article advances a theory of “Eurozone justice” by developing principled answers to two basic questions: First, what do members of monetary unions owe one another in terms of socio-economic support? Second, what institutional architecture can best instantiate these normative requirements? The argument proceeds as follows: In section one, I sketch the moral significance of monetary arrangements and monetary policy and describe European monetary union. Section two asks what moral obligations such an institution creates and I demonstrate how two influential positions, which I call state voluntarism and sovereign debt liability fail to convince: Section three rejects the former by pointing to a number of implicit moral premises in this view, which, once brought out into the open and matched to the facts of the actual unfolding of the Eurozone crisis, show that voluntarism fails. Section four rejects the sovereign debt-liability view by arguing that its seemingly plausible focus on responsibility and choice are not only implausible but also unfairly assigns liability only for fiscal imbalances but do not similarly hold creditor states liable for unsustainable trade imbalances. Building on the insights from these two “false starts”, section five formulates desiderata that a more convincing account will need to satisfy and presents an alternative moral outlook of how we should approach the moral basis of supranational monetary governance, focusing on background justice and equitable risk sharing. Section six presents some institutional proposals consistent with these more adequate moral foundations. Section seven concludes