Das Stagflationsproblem und Europa

This note, published in 1995, assesses the problems that might be
entailed by the introduction of the European monetary union. It is
argued that wage pressure will not be diminished by forming the
union, and the stagflation problem that lies at the root of the
rising trend in unemployment will persist. As exchange rates cannot
serve to compensate different wage developments in the monetary
union, imbalances will result, and subsidization less competitive
member states will be necessary. An indexation of wage settlements
is proposed that, similar to exchange rates, permits to compensate
divergent developments in wage rates across member states while
maintaining the monetary union.