This study adopts a dynamic perspective on the transformation of the Eurozone architecture, using the macro-financial model developed in Murau (2020) as conceptual framework. It analyzes changes in the web of hierarchical interlocking balance sheets in four transition phases: the preparatory stages leading up to 1999 when the Eurozone 1.0 became effective; the 2009-12 Eurocrisis; the post-crisis reform in the Eurozone 2.0; and the transition towards a Eurozone 3.0 starting with the Covid-19 crisis in March 2020.
Within the logic of the macro-financial model, the study describes the changes that have taken place in the Eurozone during each of the transition periods. This refers to institutions, instruments and elasticity space in all four segments of the monetary architecture—central banking, commercial banking, non-bank financial institutions, as well as the fiscal ecosystem. This descriptive aspect of the transformation is expressed via changes in the structure of interlocking balance sheets. On that basis, the study will ask what the causal forces were that induced those changes. For each of the transition
phases, the study depicts four possible agents of change: (a) policymakers as agents of the state with a clearly delineable democratic legitimation; (b) technocratic actors; (c) representative of corporate interest; or (d) endogenous dynamics within the credit money system.
The key intellectual interest of this study lies in the question to which extent the modern credit money system on its own is causing the transformation of itself. Murau (2017) has argued that there is an endogenous tendency of credit money systems to transform due to the possibility of creating money out of nothing. The framework of hierarchical interlocking balance sheets, which this macro-financial model provides, allows to further spell out this idea.
Presentation at Workshop “Beyond ‘normal’ central banking: New risks and the political economy of monetary and fiscal policy coordination”, Ghent University, 19-20 May 2021.