This paper explains the basics of MMT and analyzes the current design of the Eurozone from an MMT perspective. It becomes obvious that individual member states of the Eurozone lack monetary sovereignty, which is not compensated by a fiscal authority on EMU-level. This results in the current permanent lack of aggregated demand culminating in high rates of unemployment and output gaps. Although the current QE policy of the ECB enlarges individual countries’ policy space to cope with the problems at hand, the fundamental flaws in the design of the monetary union desperately need to be fixed. This is even more urgent with regards to the urgently needed socio-ecological transition that is required to tackle climate change adequately. In this light, the Green New Deal with the incorporation of a Job Guarantee program and the Euro Treasury as possible policy solutions for the Eurozone are briefly discussed.
Keywords: modern monetary theory, macroeconomics, Eurozone, Green New Deal, Job Guarantee
Ehnts, Dirk H. and Höfgen, Maurice (2019). “Modern monetary theory: a European perspective.” Real-World Economics Review, Issue no. 89, pp. 75-84