Can the ECB save the Euro zone?

Abstract

The European project of monetary unification is under threat as never before. It is, therefore, high time to point out what went wrong and what should be done to reform the Eurosystem accordingly. This paper shows that Euro zone member countries are de facto still lacking a single currency and a monetary system that would allow for the final payment of cross-border transactions. Starting from the RTGS mechanism adopted by the Eurosystem and from a comparison with the working of domestic payment systems, it describes the changes required to transform the ECB into a bank of central banks capable to guarantee the existence of a true system of intra-European payments, with or without a single European currency (that is, with or without the loss of Euro zone countries’ monetary sovereignty)

On the Inflation-Debt-Bubble “Vicious Cycle” in Times of Evolving Money—A Memorandum of Forward-Looking Lessons

“…Certainly, wealth cannot be created with the stroke of a pen nor can central and commercial banks simply generate "assets" to discharge real-term obligations ad libitum (Helliwell 1973). Despite there still being no univocal consensus on how to define "money" (Dick 2021;Fand 1970), banking systems record it as a liability precisely because of representing nothing more than a spontaneous, not redeemable "acknowledgement of debt" (Cencini 2016). If fiat money has to be "backed" by real values-hence, present or future GDP-to acquire a positive purchasing power for the macroeconomy in its entirety (and not only for the microeconomic agents having the right to create it), over-issuing it systematically does not represent a convincing solution.…”

The sovereign debt crisis: The case of Spain

“…Given the complexity of the argument and its relevance for the future of indebted countries, let us discuss further the double payment of net imports. What must be made clear from the outset is that the pathology denounced by Schmitt (2012Schmitt ( , 2014, Cencini (2016Cencini ( , 2017, and Cencini and Rossi (2015) characterizes the present non-system of international payments and occurs any time a net importing country pays for its net foreign purchases through a foreign loan. A first and superficial analysis seems to corroborate the wide-held belief that the external debt incurred by deficit countries is perfectly justified, because of the foreign loans required to finance their net imports of commercial and financial goods.…”

“…The first concerns the lack of a centralized system of payments whereby the ECB would 'vehiculate' or convey each payment between residents of different euro-member countries through the circular emission of a common currency (see Cencini, 2010Cencini, , 2016. As it happens within any national banking system, payments between clients of different banks require the intervention of the central bank acting as monetary and financial intermediary.…”