Working Paper: NBER ID: w21121
Authors: Luigi Guiso; Paola Sapienza; Luigi Zingales
Abstract: Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer this question by analyzing the cross sectional and time series variation in pro-European sentiments in the EU 15 countries. The 1992 Maastricht Treaty seems to have reduced the pro-Europe sentiment as does the 2010 Eurozone crisis. Yet, in spite of the worst recession in recent history, the Europeans still support the common currency. Europe seems trapped: there is no desire to go backward, no interest in going forward, but it is economically unsustainable to stay still.
Keywords: European integration; currency union; public sentiment; Maastricht Treaty; Eurozone crisis
JEL Codes: E42; F45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Maastricht Treaty (F15) | pro-European sentiment (F55) |
| negative macroeconomic perceptions (E66) | support for Europe (O52) |
| Eurozone crisis (H12) | support for EU membership (F55) |
| unemployment (J64) | discontent towards EU (F55) |
| public debt levels (H63) | discontent towards EU (F55) |
| deviations from optimal monetary policy (E49) | drops in sentiment towards EU and ECB (E66) |
| deviations from optimal monetary policy (E49) | drops in support for Euro (F36) |