Six Paradoxes of Eurozone Economic Policies : The Case for a Rethink of the Political Economy of EMU

The Economic and Monetary Union (EMU) is examined according to a network (complex-system) approach. Problems of idiosyncratic, endogenous and systemic risks are addressed. In this perspective, six economic paradoxes of the Eurozone are identified: inflation, liquidity, saving, de-leveraging, central bank independence from Treasuries, bank capital. They are closely intertwined, but separately identifiable: a common thread is the fallacy of composition. All paradoxes defy current economic policies of EMU, which are critically assessed: suggested lines of an in-depth rethink are predicated by making reference to an enlarged macroprudential policy paradigm, account being taken of the interactions between the different economic policies. Key features of an investment compact to bolster the Juncker Plan and to relaunch sustainable and shared growth are outlined