A Severe Economic Disease, Called “The Asset Price Inflation Virus,” Attacked the European Monetary Union

Why did European Monetary Union (EMU) enter existential crisis so soon after its creation According to the 'Berlin view' everything would have been fine if it had not been for a number of governments contriving to circumvent the strict fiscal discipline stipulated in the budget stability pact that accompanied the launch of the euro. The 'Paris and Brussels' view by contrast traces the crisis to a failure of the founding Treaty to provide for a fiscal, debt and banking union.

The leading hypothesis in this book puts the blame for the crisis and for the highly probable eventual break-up of EMU on the failure of its architects to build a structure which would withstand strong forces driving monetary instability whether from inside or outside. These flaws could have gone undetected for a long time. In practice though, very early in the life of the new union, the structure was so badly shaken as to leave EMU in a deeply ailing condition.

A severe economic disease, called 'the asset price inflation virus,' attacked EMU. The original source of the virus can be traced to the Federal Reserve, but the policies of the European Central Bank (ECB) added hugely to the danger of the attack. Serious inadequacies in Europe's new monetary framework meant that EMU had no immunity.

--Brendan Brown, Euro Crash: How Asset Price Inflation Destroys the Wealth of Nations, 3rd ed. (Houndmills, UK: Palgrave Macmillan, 2014), Kobo e-book.