What Does the 1930s’ Experience Tell Us about the Future of the Eurozone?

Abstract:

If the eurozone follows the precedent of the 1930s, it will not survive. The attractions of escaping from the gold standard then were massive and they point to a strategy of devalue and default for today's crisis countries. A fully federal Europe with a banking union and a fiscal union is the best solution, but it may be politically infeasible. However, it may be possible to underpin the euro with a ‘Bretton Woods Compromise’ that accepts some retreat from deep economic integration and provides greater policy space since exit entails risks of financial crisis that were not present 80 years ago.