1. The future of the euro still lies in its past Prof. Paolo Savona at the 79th International Atlantic Economic Conference in Milan Session on March 12,2015 20/02/151

2. Why the euro?  The logic of the euro rested on two solid pillars, but one big weakness 1.a single market needs a single currency 2.a money needs a State behind it but  The eurozone is not an optimal currency area 20/02/152

3. The architecture of the euro  The first pillar was implemented with constraints on the targets and instruments of the Eurosystem (national central banks and European Central Bank)  The implementation of the second pillar was postponed and then ignored  The need of a policy to address the weakness of the non-OCA was not taken in consideration 20/02/153

4. The economics of the euro  The primary target of the euro is to guarantee a rate of inflation not above 2%  The subordinated target is to collaborate to the success of the EU policies  Bank-lending is the main instrument to create monetary base  Government financing is prohibited  The foreign exchange rate of the euro is on a clean floating regime 20/02/154

5. Interpretations and changes of the euro framework  The 2% inflation target is interpreted as a ECB obbligation to keep it close to it  Although many dispute, the purchase of government bonds in circulation with a maturity of less than 3 years has been considered statutary legitimate  Deflationary conditions justify the use of the QE policy to pursue the subordinated target of helping EU goals 20/02/155

6. What is the EU policy to which the ECB should cooperate  The EU policy is devoted to the supply-side of the national economies: mainly a balance in the Gvrnmts’ budget deficit or a surplus if the Gvrnmt debt is higher than 60% of GDP and «reforms» of labor market and public administration  Low attention to aggregate demand and high tolerance of huge domestic b.o.p. surplus 20/02/156

7. The impact of the EU policies  EU policies deepen the divergences in national economies, the non-.OCA condition of the eurosystem and the banks’ vulnerability to domestic and foreign shocks  They increase the credit-debt relations between the member-States (as shown by the euro’s clearing house Target 2, )  They keep the lowest rate of growth among developed countries and induce social tension 20/02/157

8. The future of the euro  Given the present conditions, the future of the euro still lies in its past and can be changed only by rewriting its institutional architecture: 1.A new statute for the ECB similar to that of other main central banks 2.Greater fiscal power to the EU Commission under the direction&control of the EU Parliament 3.A policy to handle the non-OCA nature of the Eurosystem 20/02/158

9. My personal view.1  The probability of implementing the second pillar of the euro (a new EU State) is slowly and dramatically fading year after year  The very low probability to succeed in handling the non-OCA nature of the Eurosystem is a corollary of refusing a polical unification of EU  The EU is a common market with a fiat money issued by a supernational bank  All the other institutions are «shadow democratic» and «biolegal» creatures 20/02/159

10. My personal view.2 Sic stantibus rebus A.The euro will survive if the weaker EU member-States accept to become economic colonies in exchange of «assistance» B.The only limit is the reaction of the population to that condition C.The euro will collapse if Germany refuses to pay the price of its EU leadership and decide to leave the Eurosystem 20/02/1510

11. © Paolo Savona 20/02/1511